Black Swan Development Co Ltd (‘Swanco’) is a Fiji company. Shares of Swanco are largely owned by Chinese investors. Swanco is a subsidiary of Evergreen Limited a large China company. Both Swanco and its parent are engaged in the business of land development.

Swanco has a number of development projects in Fiji. Funding for the company’s projects is being raised by an issue of bonds to Fiji investors. The bonds are formally called the ‘Swanco $100 7 year 7 percent Registered Bonds’. The company plans to issue bonds having an aggregate face value of FJD $28 million.

The company announces that ¾ of the planned bond issue has already been placed with Fiji institutions priced at $101. The remaining ¼ has been reserved for retail investors and priced at $99.50. Members of the public have shown considerable interest in the offering and close to 80% of the bonds reserved for retail investors have already found buyers.

 

Required:

 - State the two promises seen in the Swanco bonds.

 - Which investor group will get the better return on investment, the institutional investors or the retail investors? Explain your answer.

 - Will Swanco establish a register of debenture holders? Be specific.