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.  Here we take a look at how you can evaluate whether the debt will affect your investment.
    Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  3. Bonds & Fixed Income

    Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.
  4. Bonds & Fixed Income

    Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
  5. Investing

    Why doesn't the price of a callable bond exceed its call price when interest rates are falling?

    A callable bond provides the issuer (borrowing entity) with an option to redeem the bond before its original maturity date. The ability to call a bond gives the issuer a way to respond to falling ...
  6. Delivery duty paid (DDP) is a shipping term.
    Investing

    What does DDP Mean?

    Delivery duty paid (DDP) is a shipping term specifying that the seller is responsible for all costs associated with delivery of the goods to the buyer. It is usually used when goods are exported ...
  7. Credit & Loans

    What's the difference between a credit bureau and a credit rating agency?

    Learn the differences between credit bureaus that report on individuals' creditworthiness and credit rating agencies that rate corporate or government debt.
  8. Bonds & Fixed Income

    Does a good credit rating guarantee repayment?

    Learn how credit ratings help investors determine the creditworthiness of an issuer and the risk associated with making an investment in the issuer's debt.
  9. Investing

    What happens to a company's stocks and bonds when it declares chapter 11 bankruptcy protection?

    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that it can once again become successful if it is given an opportunity to reorganize ...
  10. Insurance

    The Challenging Role Of The Corporate Treasurer

    Corporate treasury management has evolved from an offshoot of accounting to a more specific and strategic career.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

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

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

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

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center