Tikristan State Airways: Bond Issue - Essay Example

Download file to see previous pages As the report declares the advantage in issuing global bonds lies in the fact that they may be issued in the currency of the country from which they are being used, yet function as international instruments that may be utilized by investors all over the world. They may thus serve to pump foreign currency into the domestic economy. However, in view of the precarious state of Tikristan’s economy, the possibility of a weakening of the global bond issued by TSA must be taken into account. Moreover, the fact that clearance is offered through Euroclear and Clearstream is likely to be a confidence booster for investors.
This paper stresses that the goal that Tikristan Airways seeks to achieve is that of raising finances through the issue of permanent bonds. In effect, an investor and the bond issuer are entering into a contract, whereby the bond issuer agrees to provide a share in its corporation to the investor who offers his money as consideration. Therefore, a default by TSA in repayment of the bond amounts would be construed as a violation of the contract and subject to legal redress. Since TSA plans to issue permanent bonds, the legal structure of the agreement between the parties, set out in the terms of bond issue needs to provide for TSA’s interests. A long term repayment plan is therefore a more desirable option, in order to provide a buffer for TSA to straighten out its finances and ensure sufficient accrual of profits from operation. Lower interest rates may also be offered on long term repayment options. ...Download file to see next pagesRead More