The purpose of straight bonds is to raise medium- to long-term capital on the capital market. Straight
bonds are usually divided into bonds with a value of CHF 5'000. Bond purchasers
receive the agreed interest on a yearly basis. Upon completion of the term, the bond is fully redeemed.
Floating-rate bonds or floaters are bonds with a variable interest rate. The interest rate is determined
anew on a regular basis according to a specified key.
Zero bonds are bonds that do not throw off any interest throughout the duration of their term.
The yield is achieved by having a purchase price that is lower than the redemption price.
Dual-currency convertible bonds
Dual-currency convertible bonds attempt to benefit from the different interest rates between countries.
While a bond is paid for and throws off interest in one currency, it is redeemed in another.
In the event of liquidation or bankruptcy of the issuer, the claims of bondholders are secondary
to the claims associated with non-subordinated claims.
Bonds featuring a conversion right. Within a certain period and for a certain price, the bondholder
can convert his or her bonds into a certain number of equity securities.
Warrant bonds are bonds that feature a warrant certificate in addition to interest coupons.
Usually, the warrant entitles the holder to buy shares or other equity securities at a
predetermined price during a specified period of time.
Loan Participation Notes ("LPN")
In terms of their functionality and inherent risks, LPNs represent an investment that is comparable to a
straight bond. In return for the capital provided (nominal amount), the issuer makes interest payments at
regular intervals and, upon maturity, the bond issue is repaid at par.
But in contrast to a straight bond, an LPN involves a tripartite relationship: As a general rule, a
bank acts as the effective issuer ("legal issuer") vis-à-vis the investors. From an
economic standpoint, however, the actual borrower is a company ("economic issuer" ). That
company indirectly obtains debt capital in the marketplace via the legal issuer, i.e. a bank that is
normally also the lead manager of the transaction. The bank (legal issuer) issues LPNs for the sole
purpose of financing the loan it has granted to the company (economic issuer).
The lender, which from a legal point of view issues the LPNs as an indirect representative of the
economic issuer, books the economic issuer's interest and capital payments into a bankruptcy-secured
account and guarantees that it will pass through these cash flows to the investor.