Bonds
Alternately, a capital note is a bond with a very long maturity horizon, reaching several decades (sometimes as much as 50 or 100 years). Unlike equity securities, these capital notes do mature at some point; therefore, they form part of the company's liabilities and not part of equity. However, since their maturity is so far in the future, they are treated as equity for practical purposes; the company keeps the money raised through them inside its balance sheet for a very long time. Banks and other financial institutions issue these bonds to satisfy regulatory demands regarding capital requirements, specifically under the Basel Accords. In the Basel "tiers" system, capital notes are treated as close to equity, as both reinforce the bank's "capital". Additionally, bank capital notes are usually not collateralized and are contractually subordinated, forming a junior class of debt. Similar terms might be found in redeemable preferred shares.
Contrary to the warrant-like capital notes described above, these capital notes are usually not convertible, so they represent no current or future stake in the corporation's equity (share capital).
Read more about this topic: Capital Note
Famous quotes containing the word bonds:
“My Christian friends, in bonds of love, whose hearts in sweetest union join,
Your friendship’s like a drawing band, yet we must take the parting hand.
Your company’s sweet, your union dear; Your words delightful to my ear,
Yet when I see that we must part, You draw like cords around my heart.”
—John Blain (18th century)
“Oh! I have slipped the surly bonds of earth,
And danced the skies on laughter-silvered wings ...
And while with silent lifting mind I’ve trod
The high, untrespassed sanctity of space,
Put out my hand and touched the face of God.”
—John Gillespie Magee (c. 1922–1941)
“What we often take to be family values—the work ethic, honesty, clean living, marital fidelity, and individual responsibility—are in fact social, religious, or cultural values. To be sure, these values are transmitted by parents to their children and are familial in that sense. They do not, however, originate within the family. It is the value of close relationships with other family members, and the importance of these bonds relative to other needs.”
—David Elkind (20th century)