Debt Issue

AAA

DEFINITION of 'Debt Issue'

A fixed corporate or government obligation, such as a bond or debenture. A debt issue is a financial obligation that allows the issuer to raise funds by promising to repay the lender at a certain point in the future and in accordance with the terms of the contract. Debt issues include notes, bonds, certificates, mortgages, leases or other agreements between the issuer (the borrower) and lender. Debt issues, such as bonds, are issued by corporations to raise money for certain projects or to expand into new markets; municipalities, states and U.S. and foreign governments issue debt to finance a variety of projects such as social programs or infrastructure plans.

INVESTOPEDIA EXPLAINS 'Debt Issue'

Corporations and municipal, state and federal governments offer debt issues as a means of raising needed funds. In exchange for the "loan," the issuer must make payments to the investors (the lender) in the form of interest payments. The interest rate is often called the "coupon," and interest payments are paid using a predetermined schedule and rate. When the debt issue matures, the issuer repays the face value to the investors. Short-term bills typically have maturities between one and five years; medium term notes mature between six and twelve years; and long term bonds generally have maturities longer than 12 years. Certain large corporations, such as Coca-Cola and Walt Disney, have issued bonds with maturities as long as 100 years.

Corporate debt issues are commonly issued through the underwriting process in which one or more securities firms or banks purchase the issue in its entirety from the issuer and subsequently resell the issue to interested investors. The underwriters impose a fee on the issuer.

The process for government debt issues is different since these are typically issued in an auction format. In the United States, for example, investors can purchase bonds directly from the government through its dedicated website. A broker is not needed, and all transactions, including interest payments, are handled electronically.

RELATED TERMS
  1. Fixed Debenture

    A note that carries a fixed (as opposed to floating) charge against ...
  2. Debenture

    A type of debt instrument that is not secured by physical assets ...
  3. Bond Rating

    A grade given to bonds that indicates their credit quality. Private ...
  4. Bond

    A debt investment in which an investor loans money to an entity ...
  5. Syndicate

    A professional financial services group formed temporarily for ...
  6. Fixed Income

    A type of investing or budgeting style for which real return ...
Related Articles
  1. Will Corporate Debt Drag Your Stock ...
    Investing Basics

    Will Corporate Debt Drag Your Stock ...

  2. The Advantages Of Bonds
    Investing

    The Advantages Of Bonds

  3. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  4. Convertible Bonds: An Introduction
    Bonds & Fixed Income

    Convertible Bonds: An Introduction

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center