Global Capital Markets

2089 Words May 29th, 2008 9 Pages
1. Executive Summary

This report will evaluate the advantages and disadvantages of raising long term debt and equity capital via the global capital markets as opposed to the more traditional methods employed by the company of raising funds through the domestic markets.

2. Global Capital Revenue v Domestic

Raising capital in the global market place has a number of advantages over raising capital solely in the domestic market place. The first advantage is that by going global it will open the company up a larger market and will provide far more opportunities to raise capital as opposed to only raising capital in the domestic capital market which will severely restrict the number of potential investors. Also by raising capital globally it
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If this occurs the investor does not have the bond repaid but instead becomes a share holder in the company. An alternative to convertible form is an equity warrant. This is similar to the convertible form in that the investor can buy shares in the company at some point in the future at an agrees rate but still holds on to the bond until the date of maturity. This has the advantage that the issuing company can raise additional capital from the same source.

The Eurobond has a financially sound and institutional framework for the issuing, distribution and underwriting of the bond. For example if the company was looking to raise £10 million in capital the underwriters will guarantee to make up any shortfall of un-raised capital. This gives the security of guaranteeing the full amount of capital will be raised.

Finally the main advantage is that the issue of bonds will be in the domestic currency and therefore will negate any transaction risk.

3.1.2 Disadvantages of the Eurobond

As with any international raised capital there are risks involved. The company will need a big enough profile abroad in order to attract potential investors. Therefore the higher the company profile the more attractive prospect investing will be.

3.2 Foreign Bond

Foreign bonds are issued outside of their domestic market in the currency of the market that it has been issued in to. The bonds are underwritten by investment banks from the country of issue are will be governed by the
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