Investing in Corporate Bonds

Corporate bonds are debt obligations in which the purchaser is the lender, and the issuer, or borrower is a private or public corporation. Companies use the funds raised through the issuance of corporate bonds for a variety of purposes, including building facilities, purchasing equipment, expanding the business or consolidating or refinancing existing debt. Corporate bonds are issued in a variety of maturities and coupon structures, some of which may be callable at the option of the issuer.

Typically, when an investor purchases a bond, he or she is lending money to the corporation. In return, the corporation promises to return the principal on a specified maturity date. Until that time, the corporation agrees to pay a stated rate of interest, usually semi-annually. The interest payments received from corporate bonds is taxable. Unlike stocks, owning corporate bonds does not give the investor an ownership interest in the issuing corporation.

Yield and Risk. Corporate bonds have historically been one of the highest yielding types of taxable debt securities. Unlike U.S. Treasury and Municipal securities which are backed by government agencies that possess the authority to raise taxes in order to satisfy debt obligations, corporate bonds are subject to greater credit risk because a corporate bond’s payments are dependent solely on the company’s ability to finance its debt. The credit risk associated with corporate bonds can be reduced by investing in higher rated securities and/or by building a diversified portfolio.

Bond Anticipation Notes (BANs)

Bond Anticipation Notes, or BANs are smaller short-term bonds issued by governments and corporations. Knowing that the proceeds of the larger future issue will cover the anticipation notes, the issuing bodies use the notes as short-term financing.

THE ZIEGLER ADVANTAGE

At Ziegler, we bring expert capabilities in the underwriting of bonds in the industries of healthcare, senior living, schools, faith-based organizations and alternative energy. These are dynamic businesses that offer diverse services to our communities. The needs of these organizations and the financial structures required to support them are complex, creating opportunities for you to participate in the financing required for these organizations. We've been underwriting bonds since 1913 and since 1980, Ziegler has been the leading senior living underwriter in the nation¹, and Ziegler consistently ranks among the leaders in healthcare bond issues².

Ziegler underwrites corporate debt instruments such as church bonds, senior living facility financings and bond anticipation notes.

What does this mean to our clients? Through your Ziegler financial advisor, you have access – sometimes exclusive – to unique products and solutions for your fixed income portfolio. Click here to see a listing of our current offerings.

Fixed income securities are subject to market risk and interest rate risk. If sold in the secondary market prior to maturity, investors may experience a gain or loss depending on interest rates, market conditions and the credit quality of the issuer. B.C. Ziegler and Company does not provide tax or legal advice. Please consult your tax advisor regarding the suitability of these investments in your portfolio.

¹Full credit of underwritten principal volume given to the senior manager of transactions completed nationally. Data from Thomson Financial Securities Data as of 10/10/2011

²Full credit of the underwritten principal volume given to the senior manager of transactions completed nationally. Data from Thomson Financial Securities Data as of 12/31/2011. Healthcare consists of hospitals, health systems, clinics and senior living facilities.