This is a confidential agreement that is by negotiation between both parties. Traded investments Debt instruments sold by the company, through a broker, to investors. Typical features may include: 1. The debt is denominated in units of £100, this is called the nominal or par value and is the value at which the debt is subsequently redeemed. 2. Interest is paid at a fixed rate on the nominal or par value. 3. The debt has a lower risk than ordinary shares. It is protected by the charges and covenants. CHAPTER 4 – LONG TERM SOURCES OF FINANCE 66 Types of issued debt They include: Debentures Debt secured with a charge against assets (either fixed or floating), low risk debt offering the lowest return of commercially issued debt. Unsecured loans No security meaning the debt is more risky requiring a higher return. Mezzanine finance High risk finance raised by companies with limited or no track record and for which no other source of debt finance is available. A typical use is to fund a management buy-out. CHAPTER 4 – LONG TERM SOURCES OF FINANCE 67 OTHER SOURCES Sale and Leaseback 1. Selling good quality fixed assets such as high street buildings and leasing them back over many (25+) years. 2. Funds are released without any loss of use of assets. 3. Any potential capital gain on assets is forgone.
This is a confidential agreement that is by negotiation between both parties. Traded investments Debt instruments sold by the company, through a broker, to investors. Typical features may include: 1. The debt is denominated in units of £100, this is called the nominal or par value and is the value at which the debt is subsequently redeemed. 2. Interest is paid at a fixed rate on the nominal or par value. 3. The debt has a lower risk than ordinary shares. It is protected by the charges and covenants. CHAPTER 4 – LONG TERM SOURCES OF FINANCE 66 Types of issued debt They include: Debentures Debt secured with a charge against assets (either fixed or floating), low risk debt offering the lowest return of commercially issued debt. Unsecured loans No security meaning the debt is more risky requiring a higher return. Mezzanine finance High risk finance raised by companies with limited or no track record and for which no other source of debt finance is available. A typical use is to fund a management buy-out. CHAPTER 4 – LONG TERM SOURCES OF FINANCE 67 OTHER SOURCES Sale and Leaseback 1. Selling good quality fixed assets such as high street buildings and leasing them back over many (25+) years. 2. Funds are released without any loss of use of assets. 3. Any potential capital gain on assets is forgone.
acca%20F9%20NOTES(1).docx