A bond subscription may be an ideal solution for companies where the target company does not wish to raise finance from an outside shareholder, but financing from a bank loan is not an optimal solution either.
The purpose of the bonds subscribed by MFB Invest is to provide an appropriate form of financing for the development of domestic companies. In accordance with the general financing requirements set forth in Section 2 of the MFB Law, MFB Invest Zrt. may subscribe for non-convertible dematerialized bonds issued in a private placement within the framework of a subscription procedure. MFB Invest Zrt. carries out the bond transaction in accordance with the principle of placement on market terms, or with market shortfalls by a placement on the so-called GAP market.
A bond is a registered debt security. In the bond, the issuer (the debtor) undertakes to pay the predetermined interest on the amount of money specified therein and to pay the amount of money itself to the holder of the bond (the creditor) at the time and in the manner specified.
The amount of funding is typically between HUF 500 million and HUF 1 billion.
In our practice, 70% of the bond issue is typically financed by MFB Invest, with the remaining 30% provided by a private market co-financier. Other arrangements may be made where appropriate.
In our practice, 5-year issues tend to predominate, although longer maturities are possible given the business plan and business model. The termination of the bond and the repayment structure will be determined on a case-by-case basis in accordance with the business model and business plan of the company, but the repayment of the principal is typically made in an amortizing structure.
The bond is terminated upon payment of the full principal and all interest due. In the case of a bond with a maturity date, the termination of the bond is automatic on the maturity date or by means of a call, redemption, repurchase or transfer, depending on the structuring of the transaction.