Glossary
A binding promise in a bond's terms restricting the issuer's conduct (e.g., caps on additional debt) to protect investors.
Debt Capital Markets
from Capital Markets
Instead of selling ownership, companies can raise funds by issuing bonds — debt instruments that promise to pay investors a fixed or floating coupon (interest rate) and return the principal at maturity. Investment-grade bonds are issued by highly rated borrowers and carry lower yields, while high-yield bonds (often called junk bonds) offer higher returns to compensate for greater credit risk. Bonds may be listed on exchanges like the London Stock Exchange or traded over-the-counter. The documentation — typically an offering circular or prospectus — is heavily negotiated, with covenants restricting what the issuer can do (e.g., limits on further borrowing or asset disposals) to protect bondholders.
IPO (Initial Public Offering)
The first sale of a company's shares to the public, marking its transition from a private to a publicly listed entity.
Prospectus
A legal document disclosing all material information about the issuer and the offering, required for public offers of securities.
Underwriting
The commitment by an investment bank to purchase all or part of a securities offering, guaranteeing the issuer raises its target funds.
Bookbuilding
The process of gauging investor demand at different price levels to determine the final offer price of an IPO or bond.
Coupon
The periodic interest payment made to a bondholder, expressed as an annual percentage of the bond's face value.
Free Float
The proportion of a listed company's shares that are available for public trading, excluding shares held by insiders or strategic investors.
Yield
The annual return an investor earns on a bond, accounting for its coupon payments and the price paid for it.