These bonds are considered speculative with little investor protection, especially during times of economic weakness. Highly speculative bonds that may be in danger of default. Generally, bonds in this category are in default or have other serious problems. A specific class of lender who provides part of the long-term capital of the company. Holders of bonds are lenders and receive regular interest, or coupon, income.
Lenders often have a prior claim on assets of the company.
This gives the investor the right to buy a company's shares within a certain time at an attractive price. Most bonds are rated by credit rating agencies that assess the borrower's ability to repay debts. Bondholders generally stand in front of shareholders in any claim on the assets of a corporation when a company is in financial difficulty. The underwriter would use its best efforts to sell the full amount of the issue, but there were no guarantees. A bought deal means the investment dealer buys all of the new shares, guaranteeing the total return to the issuer.