Bond Purchase Agreement

AAA

DEFINITION of 'Bond Purchase Agreement'

A legally binding document between a bond issuer and an underwriter establishing the terms of a bond sale. The terms of a bond purchase agreement will include sale conditions, sale price, bond interest rate, bond maturity, bond redemption provisions, sinking fund provisions and conditions under which the agreement may be canceled. After the issuer delivers the bonds to the underwriter and the underwriter pays the issuer for them, the underwriter will put the bonds on the market at the price and yield established in the bond purchase agreement and investors will purchase the bonds from the underwriter. The underwriter collects the proceeds from this sale and earns a profit based on the difference between the price at which it purchased the bonds and the price at which it sells the bonds.

INVESTOPEDIA EXPLAINS 'Bond Purchase Agreement'

A bond purchase agreement has many conditions. For example, it should require that the issuer not take on any other debt secured by the same assets that will secure the bonds the underwriter is selling, and it should require that the issuer notify the underwriter of any adverse change in the issuer's financial position. The bond purchase agreement also guarantees that the issuer is who it says it is, that it is authorized to issue bonds, that it is not the subject of a lawsuit and that its financial statements are accurate.

RELATED TERMS
  1. Dim Sum Bond

    A bond denominated in Chinese yuan and issued in Hong Kong. Dim ...
  2. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  3. Corporate Bond

    A debt security issued by a corporation and sold to investors. ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with ...
  6. Lloyds Organizations

    An insurance syndicate that bases its organizational structure ...
Related Articles
  1. A credit rating is a useful tool not only for the investor, but also for the entities looking for investors.
    Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  2. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  3. Mutual Funds & ETFs

    Bond ETFs: A Viable Alternative

    Discover the advantages of a security that tracks bond index funds, but trades like a stock.
  4. Bonds & Fixed Income

    Why Bad Bonds Get Good Ratings

    Credit ratings are not the only tool to rely on when assessing bonds. Find out why they sometimes fall short.
  5. Bonds & Fixed Income

    Asset Allocation In A Bond Portfolio

    An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why!
  6. Home & Auto

    What is real estate underwriting?

    See how underwriters for major lenders scrutinize real estate loans and manage their risk, and learn the origin of the term "underwriting."
  7. Investing

    In an IPO, who is a greensheet distributed to and for what purpose?

    One of the most talked about documents that arises in the process of introducing a new issue is the greensheet. This is an internal marketing document prepared by the underwriter and intended ...
  8. Looking for a career that offers big financial upside and the lure of self-employment?
    Entrepreneurship

    Want To Sell Life Insurance? Read This First

    Looking for a career that offers big financial upside and the lure of self-employment? Insurance sales could well be for you.
  9. Investing

    What is a company's worth, and who determines its stock price?

    A company's worth - its total value - is its market capitalization, and it is represented by the company's stock price. Market cap (as it is commonly referred to) is equal to the stock price ...
  10. IPOs can be a great way to get in early, but these companies remind investors to be cautious when investing in new issues.
    Investing

    The Biggest IPO Flops

    IPOs can be a great way to get in early, but these companies remind investors to be cautious when investing in new issues.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center