Академический Документы
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By Widiananda Prabowo
Magister Management Universitas Brawijaya 2019/2020
Matrikulasi Kelas DB
1. Q : When would a firm obtain a floating-rate loan rather than a fixed-rate loan?
2. Q : When a firm plans to issue bonds, what legal document is created by the firm,
and what is included in this document?
A : When a firm plans to issue bonds, it creates an indenture. Between bond issuers
and bondholders, an indenture is a legal and binding contract specifying all the
important features of a bond, such as its maturity date, the timing of interest
payments, method of interest calculation and callable or convertible features, if
applicable. The bond indenture also contains all the terms and conditions applicable
to the bond issue. Other critical information included in the indenture is the financial
covenants that govern the issuer and the formulas for calculating whether the issuer
is within the covenants. Should a conflict arise between the issuer and bondholder,
the indenture is the reference document utilized for conflict resolution. As a result,
the indenture contains all the minutiae of the bond issue. In the fixed-income
market, an indenture is hardly ever referred to when times are normal. But the
indenture becomes the go-to document when certain events take place, such as if
the issuer is in danger of violating a bond covenant. The indenture is then scrutinized
closely to make sure there is no ambiguity in calculating the financial ratios that
determine whether the issuer is abiding by the covenants. The indenture is another
name for the bond contract terms, which are also referred to as a deed of trust. An
indenture trustee handles fiduciary duties related to investments. These
professionals monitor interest payments, redemptions, and investor
communications, and they lead trust departments at institutions. Essentially, their
role is to oversee and administer security-backed indentures issued by a company.
3. Q : Why might a creditor prefer informal remedies to formal remedies in the event
of a business failure?