Costs of corporate bond issue in coal mining companies
PBN-AR
Instytucja
Wydział Górnictwa i Geoinżynierii (Akademia Górniczo-Hutnicza im. Stanisława Staszica w Krakowie)
Informacje podstawowe
Główny język publikacji
EN
Czasopismo
Współczesna Ekonomia = Contemporary Economics
ISSN
1897-9254
EISSN
Wydawca
Wyższa Szkoła Finansów i Zarządzania (Warszawa) - Warsaw School of Finance and Management
DOI
Rok publikacji
2016
Numer zeszytu
2
Strony od-do
99--111
Numer tomu
10
Identyfikator DOI
Liczba arkuszy
0.85
Autorzy
(liczba autorów: 2)
Pozostali autorzy
+ 1
Słowa kluczowe
EN
collateral
level of issue
cost of bonds
bond rates
Streszczenia
Język
EN
Treść
In Poland, more than 90% of electricity production is based on coal fuel. Meanwhile, the financial situation of the mining industry is quite challenging. Companies in this sector are in debt, generating losses caused by a sharp drop in coal prices and a simultaneous increase in extraction costs that result from descending into lower levels of coal deposits. At the same time, banks are reluctant to loan money because of the risk of a borrowing entity's default. Increasingly, companies are turning to bond issue to maintain their liquidity and finance development projects. However, bondholders impose conditions in the form of covenants that are often difficult to satisfy, and the strictest relate to the level of a company's indebtedness and ability-to-repay-debt financial ratios. This article discusses bond issue costs. The authors analyze the bond issue programs of three of the four mining companies operating in Poland. The fourth company did not issue any bonds. Bond issue costs are composed of interest payable to investors, issue preparation and support costs, collateralization costs, and the cost of recording and organizing the sale. The main cost involved in bond issuance is the coupon cost, which depends on the company's financial health and its level of indebtedness, the purpose of the issue, its volume, and the type and quality of the safeguards against the risk of loss of funds invested by bondholders. Bonds issued by coal mining companies are assumed mainly by banks, which demand high interest due to the poor financial condition of the issuers. In addition to interest, companies also pay a capital commitment fee, an arrangement fee and a fee for early redemption. Altogether, in relation to the costs of capital raised through a bank loan, the bond issue results in significantly higher costs of raising capital.
Cechy publikacji
original article
peer-reviewed
Inne
System-identifier
idp:100042