Get your free $100,000 CFD trading account today

BuyPennyStocks.com - an unbiased resource dedicated to helping investors interested in penny stocks.

Advertise with Shareworld now and profit from our future
Click here for more information

ANSWER 17th November 2008

Debt finance is the raising of capital through the issue of debt such as a corporate bond rather than through equity or bank facility. Bonds have recently been out of favour recently due to the inability, or investors perception of the inability, of many of the issuers to pay the interest payments or the capital at redemption. Investors appetite has now slightly been whetted due to the short term risk of equities. In many cases a corporation will have organised a certain capital project which is financed by cash or bank facility which will be repaid from the cash flow of the project. If this cash can be refinanced by a bond then the cash will be released for further projects. These  bonds would normally be for a fixed term and with a fixed coupon. depending on the project the interest rate could be fairly high and may include an 'equity kicker' which would make the bond more attractive to investors. This could be in the form of options or warrants from the issuing company which, if the project is successful wuld be converted into shares at the end of the bond's life.