Question

FIN C 600

Explain the difference between public debt offerings and private debt offerings. Provide a recent example of corporations using each type of offering.

Provide some references

Answer 1

Issuers have two options for accessing funding, a public offering or a private placement.

public debt offering

The most common type of public offering is the IPO (Initial Public Offering), in which public investors are offered equity shares of the company for the first time and  the issuer publicizes the upcoming bond issue, provides the timeframe and platform for which bids will be accepted, and provides any additional guidelines or details related to the bond issue. Generally, the winning bidder(s) is the one who has offered the lowest total interest costs, including all costs of issuance and underwriter fees. The two methods by which an issuer can sell bonds to the public are a negotiated sale and a competitive sale.

example : CROWDSTRIKE HOLDINGS , INC.

private debt offerings

In case of private offerings, the sale of securities is done to a very small number of select investors, which may include large banks, insurance companies, mutual funds and pension funds. In private offering method the company does not have to register with the SEC and hence the rules and regulations of SEC does not apply to the company. The private financial institution is effectively providing a loan to the issuer that must be repaid over time. In general, private placements do not require many of the disclosure requirements found in public offerings. As such, private placement bonds are not publicly issued or publicly traded and typically do not require a rating from a credit rating agency.

EXAMPLE : patterson - UTI energy inc.