The bondholder is that person or entity that is in possession of fixed income securities issued by a company or State, forming part of its creditors.
Fixed income securities are financial assets that represent debt obligations for their issuer, bonds or obligations that companies or states issue to finance themselves.
Rights of the bondholder
The bondholder acquires the following rights when buying or subscribing bonds or debt obligations.
- Charge the agreed interest on the nominal value of the title.
- Receive the money loaned to the company in the agreed installments and terms.
You can keep these rights as long as you have the securities in your possession, that is, as long as you do not sell them, and despite the default or bankruptcy of the company.
Unlike the shareholders, who are partners, the bondholder does not own the debt issuing company for the mere fact of owning its bonds or obligations. Therefore, it does not acquire the political rights associated with being a shareholder.
Furthermore, the bondholder is among the first places in the order of priority of payments in the event of liquidation of the company issuing the debt, except in the case of subordinated debt. Depending on the credit quality of the debt held by the bondholder, it will occupy a more favorable or less place on said scale.
The bondholder can acquire the securities in the new issues that are issued in the primary markets or through trading in the secondary markets, organized or unorganized (OTC).
The bondholders are grouped into a union, which appoints a commissioner who presides over it and is in charge of looking after the interests of its members. Its function is to act as an interlocutor between the bondholders and the issuing company to reach favorable agreements for both parties.
It is necessarily constituted by law in each issue and every subscriber of the company’s debt must be part of it, according to the law of capital companies.
Its operation is subject to the internal regulations of the union and these are subject, in turn, to what is established in the statutes of the bond issuance deed.
The union has an analogue to the general meeting of shareholders, the general assembly of bondholders. The assembly is the decision-making body in matters that affect the common interests of the bondholders.
The union is born with the registration of the issuance deed and is dissolved with the amortization of all obligations.