Bond issue

Bond issue.  Your parent company may incur additional long-term debt by issuing new bonds in amounts that are multiples of $1,000,000.  New bond issues are callable ten-year bonds carrying the long-term rate of interest that will be available to a company with your credit rating during the quarter of issue.  In the financial markets, there is some uncertainty in planning a bond issue regarding the actual rate that will be available at the time of issue. This amount isn't normally known very much in advance.  In the simulation, the investment banker doesn't fix the rate until the first day of the quarter in which the bonds are to be sold.

Bonds must be secured by plant and equipment.  The value of existing bonds plus new bonds to be issued may not exceed 75 percent of net fixed assets.  Furthermore, your investment banker will consider an issue too risky to underwrite if the existing bonds, plus new bonds to be issued, exceed 50 percent of total equity (consisting of the previous quarter's total equity plus the proceeds of new shares to be sold simultaneously with the bonds—see Finance--"Sale of Common Stock").  Enter the amount of new bonds to be sold (in thousands of dollars) on the decision form under Bond Issue.  If you decide to issue $1,000,000 worth of bonds, enter 1000 on the decision form.  Do not include commas in your entry.  Bonds can be issued only by the parent company.

Maximum issue:  50 percent of equity or 75 percent of net fixed assets, whichever is less

Limits:  0 to 9000 (in thousands of dollars), in million dollar lots