Larger companies may arrange borrowing facilities from their bank, in the form of bank loans or bank overdrafts. Instead, however, they might prefer to borrow from private investors by issuing Eurobonds.

 A eurobond is a bond issued in a capital market denominated in a currency which often differs from that of the country of issue and sold internationally. Eurobonds are therefore, longterm loans raised by international companies or other institutions in several countries at the same time.

 The interest rate on a eurobond issue may be fixed or variable (floating rate bonds). Many variable rate issues have a minimum interest rate which the bondholders are guaranteed, even if market rates fall even lower. These bonds therefore, convert to a fixed rate when market rates fall to the minimum interest rate.

 An investor subscribing to a bond issue will be concerned about:

 (a) Security: The borrower must be of high quality

(b) Marketability: Investors wish to have a ready market in which bonds can be bought and sold

(c) The return on the investment as indicated by the coupon interest rates