Bonds

Bonds are fixed-income debt instruments issued by a company or government to raise capital from investors, in exchange for periodic interest payments (coupon) and repayment of principal at maturity. In corporate finance, they represent an alternative to bank financing and are used in financial structuring, particularly in LBO transactions (high-yield bonds) and long-term investment programmes. Their valuation for balance sheet purposes or in financial instrument valuation mandates uses discounted cash flow models, with discount rates derived from credit spreads and market reference rates.

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Example: a Swiss industrial group issues CHF 50.0 million of 5-year bonds at a fixed coupon of 2.8% to finance a strategic acquisition. The bonds are listed on the SIX Swiss Exchange and valued at fair value in the consolidated IFRS accounts using a market interest rate of 3.1% — resulting in a fair value below par of CHF 48.6 million at the first annual reporting date.

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Hectelion values bonds and fixed-income instruments for financial reporting, transaction and litigation purposes.