Collective Bonds

Collective Bonds are a type of bond that have two or more issuers.

Characteristics:

• Issuers of Collective Bonds can be both enterprises and municipalities;
• If the bond issuers are municipalities, the Ministry of Finance can combine issues and place securities as debt obligations of the Ministry of Finance, which, for example, occurs in China;
• If the bond issuers are participants in the corporate sector, they are mainly medium and small enterprises that are close in their field of activity;
• The shares of liabilities of different issuers in the total amount of debt, as well as the credit ratings of each of the issuers, may differ.

Advantages:

• The increased number of bond issuers contributes to risk diversification;
• The ability to jointly issue Collective Bonds allows small issuers to issue bonds.

Disadvantages:

• Rather high requirements for the credit quality of borrowers who want to participate in the bond issue;
• Failure to repay the debt by one of the issuers leads to the default of the entire issue.

Examples of Collective Bonds include the issue of municipalities Hebei, Shanxi, Heilongjiang, Henan, Chongqing, Yunnan, Shaanxi, as well as the issue of corporate issuers Adani Green Energy, Prayatna Developers Private Limited, Parampujya Solar Energy Private Limited.