Q.8 What is the process of bringing a new international bond issue to market?
Answers
A borrower who wishes to increase funds by issuing Eurobonds to the investing public will an investment banker and ask it to serve as lead manager of an underwriting syndicate which will bring the bonds to market. The lead manager will invite other banks to form a managing group to assist in negotiating terms with the borrower and manage the issuance. The managing group along with other banks will serve as underwriters for the issue that means they will commit their own capital to buy the issue from the borrower at a discount from the issue price. So many underwriters, and other banks will be part of a selling group which sells the bonds to the investing public. The several members of the underwriting syndicate will receive a portion of the spread (mostly in the range of 2 to 2.5% of the issue size), depending on the number and type of functions they perform. The lead manager will receive the full spread, and a bank serving as just a member of the selling group will receive a smaller portion.