Economics and Finance Essay Example | Topics and Well Written Essays - 2000 words

Economics and Finance - Essay Example Another important feature of a developed bond market is that this corporate bond market provides an alternative source for funds used for operational purposes by the private sector other than borrowing from banks or from the equity markets. Debentures, Unsecured Notes and subordinated debts are those securities which are traded and issued on the corporate bond market. Those firms which are running efficiently and successfully can also decide to spread out their activities and start-up new projects. To start new projects the firms need to raise capital. Hence the firm can decide on raising those funds from the bond market as it can be advantageous for the firm in the long run. Understanding the corporate bond market is critical for any company. The following sections give an outlook of the market, on how it functions(the securities which can be issued in the market), the advantages of issuing bonds over other sources such as equity markets and other sources of finance, the types of fi rms that can issue the corporate bonds, the providers of debt and their requirements. The information of the corporate bond markets will help the Board in making informed decision regarding the use of corporate bonds for raising capital to finance the new project which is worth 800 million. Types of securities that can be issued in the corporate bond market The following are the three types of securities that a firm can issue. 1. Debentures A debenture is a type of a document which is not secured by any collateral. Below are the two types of debentures explained? a. Fixed-Charge debenture:. In this type of debenture, a charge is fixed over those assets which are permanent for example fixed assets like buildings. In case the company defaults, these assets are not allowed to be sold until the bondholder has been satisfied in the event of default. The first claim on the assets is of these bondholders b. Floating-charge debenture: In this type of debenture, the charge is floating, that is a charge is issued over assets such as finished goods. Since, these assets are meant to be sold the firm issues a floating charge over these assets. When the firm defaults the floating charge is converted into fixed charge. The bondholders can then take control of the assets. When the claims of the fixed charge bondholders are satisfied, they can claim the remaining assets of the firm. 2. Unsecured Notes It is a corporate bond with no underlying security attached to it. The bondholders cannot claim the assets until the fixed-charge and floating-charge bondholders are satisfied. In the event of default, the unsecured notes holders will be paid last. 3. Subordinated Debt Subordinated debt is that type of a debt which is issued for the long-term and in the event of a default, subordinated debt holders receive after all other creditors. Subordinated debt is closer to equity than debt. It is shown as shareholders’ funds on the balance sheet. It improves the credit rating of the firm. As a result the firm can borrow more easily. Types of firms that qualify for raising direct debt Direct debt can be raised by public limited companies, who can do this by issuing financial securities such as stock and bonds.. These shares can be issued to the general public by means of an Initial Public Offering (IPO) and

Describe and Evaluate the Circumstances in Which a Term may be Implied Essay

Describe and Evaluate the Circumstances in Which a Term may be Implied Into a Contract - Essay Example In some occasions the courts will read a term into the contract even though there has been no agreement. This could happen where the contract would not make sense if the term were not included. Implied terms can be implied by statute or by the courts. The Sale of Goods Act 1979 demonstrates how implied terms are used in contract formation. S12 of this Act implies that the person selling the goods has a legal right to sell those goods. Similarly s13 implies that the goods will correspond to the description if the goods have been advertised in a newspaper or catalogue. There is an implied term regarding the satisfactory quality of the goods under s14. It was decided by the court in Benfield (t/a Autoroute Circuits) v Life Racing Ltd [2007]1 that there was no implied guarantee that a particular outcome would be achieved. The court also found that there was no evidence to prove that the defendant was relying on the plaintiff for such a guarantee. Similarly the Supply of Goods and Services Act 1982 also have terms which are implied into the contract. Within that Act there is an implication that the services will be carried out with reasonable skill and care, within a reasonable time and for a reasonable price. In the past the courts have allowed claims under this Act where the goods have been of unsatisfactory quality, where the order has been delivered late or where the price is deemed to be unreasonable. In Walker Crisps Stockbrokers Ltd v Savill [2007]2 the court found that there had been a breach of an implied term of the contract that the broker would carry out his duties with reasonable skill and care. However in the case of Evans v Kosmar Villa Holiday Plc [2007]3 the court of appeal overturned the original ruling that there was an implied term that the holiday company would exercise reasonable skill and care in the provision of facilities and service at the