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Chapter 24, Problem 1P

Explain some of the differences between a public debt offering and a private debt offering.

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Summary Introduction

To discuss: The difference between a public debt offering and a private debt offering.

Introduction: Debt offering happens when a company issues debt; it is basically a loan from an investor who purchases deb. The investor receives a promise or commitment that the debt issuer will pay some type of interest to the debt holder and, at a later date, pay back the principal payment to the investor.

Explanation of Solution

The difference between a public debt offering and a private debt offering is as follows:

A private debt offering is held in private to a select group of investors. Since the bonds are not public, the financial information is not required to be published and they do not require a credit rating. On the other hand, public debt offering is where a company publicizes their upcoming debt offering information like date, time, place and various types of security offerings to the public and potential investors. Financial information must be published annually to the public for a public debt offering. These public debt offerings are very competitive, so it requires credit rating in order for the investor to easily understand the debt creditworthiness of the public debt offering.

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