ZOOM ON... Bonds

Definition

The bond confers on its holder (bondholder) a right of claim, a right held by the "creditor" (the lender) against the "debtor" (the borrower).

The bondholder receives a remuneration paid periodically in the form of interest and the capital is repaid at maturity in accordance with the terms and conditions set out in the issue contract.

Rights attached to the bonds

The holder of a bond has financial rights that result in a right to interest until the principal is repaid in full.

This interest is calculated by multiplying the initially agreed upon interest rate (always given on an annual basis), by the amount lent.

Example: An investor who subscribes to 1,000 bonds of €10 each (an investment of €10,000) at an annual interest rate of 10% will receive €1,000 in interest on the first anniversary of the bonds.

The bondholder benefits from a collective right which is exercised within the body of bondholders, i.e. all the bond subscribers, which has legal personality. It is an entity with rights and duties.

The representative of the bondholders' group has the power to carry out, on behalf of the group, all management acts to defend the common interests of the bondholders. The company Raizers represents the bondholders' group within the framework of the bond issues carried out on the participative financing platform.

In France, only joint stock companies, sociétés anonymes, sociétés en commandite par actions, sociétés par actions simplifiée and, under certain conditions, limited liability companies (SARLs) may issue bonds.

Benefits of Bonds

Issuing a bond has advantages for both the borrower and the investor.

• For the borrower

Thanks to the bonds, the promoter or issuer can finance itself over the desired period by borrowing, so that it does not have to fear, contrary to a capital increase, a dilution of its capital, there will be no dividend sharing either, simply interest to be paid back.

In addition, the issuer is free to negotiate the terms of the loan with the lender or its representative.

• For the investor

A bond makes it easy to lend money and receive income in the form of interest. Also, the conditions in terms of repayment terms and interest payments can be quite variable depending on the issuer, which makes it possible to offer a nice diversification to your bond portfolio. Here are the main criteria and ranges you will find on Raizers:

• Interest rate between 7.5% and 12%.
• Loan duration from 12 to 36 months
• Interest is usually paid annually and in some cases at maturity
• The capital is either paid at maturity or, often in the case where investors benefit from a mortgage-type guarantee, repayments can be made as lots are sold.
• The main guarantees that bring even more security to the bond are most often :
  • First Mortgage;
  • GAPD (Guarantee On First Demand) ;
  • Security trust ;
  • Personal surety;
  • Pledge of shares...

Finally, the unlisted bond is an investment that offers portfolio diversification against the vagaries of the stock market.

Discover our video explaining the bond issue