Foreign bonds can be defined as bonds that are issued by a global borrower and sold to investors in countries with currencies other than the currency in which the bond is denominated while Eurobonds are issued in a host country’s bonds market, in the host country’s currency, by a foreign borrower. This bond is subjected to the protocols enacted on all securities traded in the national market and sometimes to special regulations and disclosure requirements governing foreign borrowers.
Many of these issues have flamboyant names such as Yankee bonds: dollar-denominated bonds which are issued by non-American borrowers in the U.S. market, Samurai bonds: yen-denominated bonds which are issued by non-Japanese borrowers in the Japanese market, Bulldog bonds: pound sterling-denominated bonds which are issued by non-British borrowers in the British market, Heidi bonds: franc-denominated bonds which are issued by non-Swiss borrowers in the Swiss market, Rembrandt bonds: guilder (now euro)-denominated bonds which are issued by non-Dutch borrowers in the Dutch market and Matador bonds: peseta (now euro)-denominated bonds which are issued by non-Spanish borrowers in the Spanish market.
Functions of the International Bonds Market
Shoprite can use the international bonds markets for diverse purposes during expansion in foreign markets. Firstly, Shoprite can issue bonds in foreign markets as it can attract a bigger and richer customer base rather in its domestic region. Therefore, havin...
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...rates in order to attract more potential bondholders and hence higher interest rate costs.
Even though, the bonds have high interest rate, the face-value of the bonds have to be repaid eventually on the maturity date. This can be difficult for Shoprite if the foreign expansion has not been a successful performance and therefore no revenue generated. This may lead to a spiral of loans till Shoprite closes down.
However the disadvantages of utilizing the bond markets can be avoided if the bonds management is efficient taking into consideration several changing aspects of the world economic and financial conditions. Moreover, the advantages of using the international bonds market outweigh the potential problems for Shoprite as it presents numerous competitive advantage compared to Pick n Pay or Walmart as described is the advantages section.
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