Corporate bond

Corporate bond (or corporate loan or corporate note or debenture) – A bond issued by a company. It is a bond that the company sells to “borrow” money in order to expand its business. The company promises to pay the investor (the lender) back on a future maturity date and pay interest in the meantime. There are different kinds of corporate bonds. In some cases, repayment may be secured by specific assets (e.g., cash, securities, real estate or equipment) which can be seized if the company fails to pay interest or return the original principal when the bond matures. Others that are not secured (debentures) are merely a promise to pay the investor back, as documented in an agreement called an indenture. Corporate bonds do not give investors an ownership interest in the issuing company, but they often have added features, including giving investors the option to convert their bonds into the company’s stock, or the company may have the right to buy back the bonds before they mature in order to refinance their debt. Typically, globally, there are five main classes of issuers of corporate bonds: public utilities; transportation companies; industrial corporations; financial services companies; and conglomerates.