Question

Discuss the steps in the bond issuance process, and explain why a healthcare organization would consider issuing bonds as its source of capital.

Answer 1

Procedure for issuance of Bonds:

1.Authority for issue - First of all the company should be having powers to issue bond to the public, if it is not having such powers in its articles of association it should alter the same by getting approval from its shareholders in general meeting.

2. Lead arranger Appointment for managing the complete bonds issuance.

3. Preparing an offer document for the bonds issue to attract the investors and the preparation should be incompliance with the local regulatory.

4. Creating charge on assets of the company if required by the statute.

5. Getting credit rating from the credit rating agencies available in the country.

6. Finalise and allot the bonds to the subscribers and listing them in the stock exchange after due allotment.

Why a healthcare organization would consider issuing bonds as its source of capital?

There are lot of benefits when the sourcing of capital is from BONDS, some of them in which the company could be interested in are,

1. If the company has issued equity their holding gets diluted and participation in the ownership will increases, by issuing bonds that can be escaped.
2. Payment of interest will saves the taxes, and it could improve the better profitability.
3. Retaining the profits unlike with the issue of equity the profits will gets shared among all.
4. Overall cost of capital will decreases because of presence of taxes.
5. Business credit score will be built.