Guan Chong Berhad Case Study

Based on the company, Guan Chong Berhad, the types of funding that I suggest to the company employ to its business are subordinated bond and debentures.
There are variety bond in the market. A bond is a loan or an IOU. When you buy a bond, you lend your money to a large borrower such as a corporation or governmental body (Annette, T 2011, p. 3). A bond is the financial security that issued by a business as an alternative of borrowing long-term funds (Financial Glossary 2011). When an entity like Guan Chong Berhad need to raise money to maintain ongoing operations or finance new projects, they can issue bonds to the investors rather than get the loans from a bank which have the higher interest rate that compare to issuing the bonds. Subordinated bond (or debt) is one of the type of the bonds that issued by a company. It is a debt issued by companies that ranks behind both secured debt and debentures security which refers to the ranking below others securities with regard in claiming on assets or earnings of company (Moorad 2004, p. 134). The company which issues subordinated bonds will not be paid out until all the senior debtholders are fully paid. Basically, a bankruptcy court will give priority to loan repayment and order that the company repay the outstanding loans with the asset if the company defaults and files into

And, the dividends paid are paid out of net profits after taxes to the equity. There is no dilution of control for the debenture-holders. This is due to the debenture-holders have no voting right. The control of the debenture-holders will dilute proportionately if issue of debentures. Guan Chong Berhad have the ownership in managing the company if debenture-holders’ control are diluted. Because of debenture-holders have no right to vote which means there is no interruption, therefore, the company can make the decision