Handbook of Finance: Financial Markets and Instruments

Chapter 23. Corporate Fixed Income Securities

FRANK J. FABOZZI, PhD, CFA, CPA

Professor in the Practice of Finance, Yale School of Management

Abstract: To obtain financing, a corporation can rely on several sources of funds. In general, the sources of financing can be classified as equity and debt. Equity financing includes the sale of common stock and preferred stock. Because of the investment attributes of preferred stock, it is classified in the financial market as a fixed income security. Debt can be obtained by either borrowing funds from a bank or issuing debt obligations in the nonbank market. The latter includes corporate bonds, medium-term notes, asset-backed securities, and commercial paper. These debt instruments can be issued in the public market or privately placed. Corporate debt obligations are referred to as fixed income securities.

Keywords: term bonds, bonds, serial bonds, indenture, mortgage debt, open-end mortgage, after-acquired property clause, release and substitution of property clause, first mortgage bonds, first refunding bonds, general and refunding mortgage bonds, collateral trust bonds, equipment trust certificates (ETCs), negative pledge clause, make-whole premium provision, yield-maintenance premium provision, make-whole redemption price, currently callable issue, noncallable, nonrefundable, bullet bonds, sinking-fund provision, balloon maturity, mandatory sinking fund, nonmandatory sinking-fund provision, specific sinking fund, nonspecific sinking fund, ...