PRESENTATION

ON

INTERNATIONAL BONDS

PRESENTED BY-KRUSHNA CHANDRA

SAHOO

INTRODUCTION

•International bonds are debt instrument.

•They are issued by international agencies ,govts and companies for borrowing foreign currency for a specified period of time.

•The issuer pays interest to the creditor and makes repayment of capital.

Types of international bonds• Foreign bonds:-when domestic country

selects foreign financial market where bonds are issued in the currency of that country. Ex.. If an Indian company issues bonds in New York and the bond is denominated in us dollar, will be called a foreign bond.

• Euro bonds:-they are denominated in a currency other than the currency of the country where the bonds were issued.

• Ex ...if the Indian company’s bond is denominated in us dollar, the bonds will be issued in any country other than USA.then only it will be called a euro bond.

• Global bonds –first issued by world bank in 1989.

• Since 1992 these are issued by companies.• They are normally large in size and carry high

rating.• They are offered simultaneous placement in

different countries.• They are traded on home market basis in

different regions.

Straight bonds:-• These are traditional type of bonds. In these

case interest rate is fixed.such interest rate is known as coupon rate. The credit worthiness of the borrower is also taken into consideration for fixing the coupon rate. It may be of following types:

• Bullet redemption bond—• Rising coupon bond—• Zero-coupon bond—• Bull and bear bonds—•

Floating rate notes:-• Bonds which don't carry fixed rate of interest.• First issued in Italy during 1970.• Interest rates are revised periodically say in

every three months or every six month period. it may be of following types. such as:

• Perpetual FRN• Minmax FRN• Drop lock FRN• Mismatch FRN• Hybrid fixed rate reverse FRN

Convertible bonds:-

• The bonds which are convertible into equity shares after a specified period of time is known as convertible bonds. some of the convertible bonds have detachable warrant.

• Cocktail bonds:- when bonds are denominated in a mixture of currency, such bonds are known as cocktail bonds. The investors purchasing cocktali bonds get automatically the currency diversification benefits. Foreign exchange risk on account of depreciation of one currency is offset by depreciation of another currency.

Procedure of issue

• stage- 1:- Appointment of lead managers for getting advice regarding different aspects of the issue (regarding price, timing maturity, and size of the issue).

• Stage-2:- the second stage begins when the issue is launched. in this stage investor looks at the credit rating of the issuer as well as who is underwriting the issue.

Stage-3:………• Third stage begins after the underwriting

process is complete. this stage includes the process of selling the bonds. here lead manager acts as a selling group and for that he charges commission.

• The entire procedure of international bond issue is complete within a specified time period. after the press release of prospectus it takes 27 days.

• First 12 days—sales campaign (offering period)

• On 12th day-signing of underwriting agrement(pricing day)

• Rest 15 days- bonds are sold and payments are made.