Appointing Lead Manager(s)

Although issuers can technically sell bonds to the public, they often hire one or several dealers, known as lead managers, to help with the bond issuance process. Dealers are knowledgeable in debt capital markets and well-connected with various institutional and retail investors.


To mitigate risk and to reach a broad group of potential investors, lead managers usually invite other dealers to join the deal. Those who accept the invite will become part of the syndicate. Once the syndicate has been formed, the deal is considered launched. It is not uncommon that the syndicate will further utilize a selling group of dealers and brokerage firms to market/sell bonds to investors.

Negotiating Terms

The issuer then sits with the lead managers to negotiate the terms of the deal. Major items such as amount of money the issuer wants to raise, type of deal (i.e. underwritten vs. agency) type of debt (e.g. secured vs. unsecured), bond tenors (e.g. 5 year vs. 10 year, or multiple tenors) and use of proceeds will be discussed in details. Once terms are finalized, a term sheet will be put together by the lead managers. An underwriting agreement will also be signed between issuer and the syndicate.

Due Diligence

Lawyers, auditors, and dealers perform due diligence on various aspects (e.g. operations, financial, tax) of the issuer to ensure that their registration statements are accurate. Due diligence includes reviewing key documents such as historical financial statements and contractual agreements as well as performing industry research. The process is concluded with a bring-down call/meeting, where lawyers, auditors, dealers, and sometimes a technical committee (often used in technical industries like mining) will ask the issuer questions to confirm the results of the due diligence investigations.

Preparing the Prospectus

Provided that no material risk is found in the due diligence process, lead managers, with the help of lawyers, will draft a preliminary prospectus to be filed with regulators. The prospectus provides all relevant information for investors with the exception of bond price, coupon, and principal amount, as these factors are not yet determined.


While the prospectus is being reviewed by regulators to ensure all material information has been fully disclosed, bookrunners help the issuer build interest from investors - this is known as “book building”. Typically, as part of the book building process, dealers accompany the issuer on a roadshow, where the issuer will market the bond to investors.

Pricing & Allocation

After the marketing period ends, the new issue is launched. On the launch date, the bookrunners work with investors and the issuer to set the principal amount and credit spread or coupon rate for the bond based on factors including demand for the bond by investors, current market conditions, and issuer specific considerations.

  1. Pricing - setting the appropriate credit spread or coupon rate for the issuance can be a difficult task for issuers. A low credit spread or coupon rate may not attract enough investors to execute the deal, while a high credit spread or coupon rate could result in a undesirable interest coupon for the issuer.

  2. Allocation - the process of allocating the new issue to investors is generally determined by the bookrunners. When a deal has investor demand that exceeds the issuer’s target size, the deal is “oversubscribed”, and the issuer can choose to upsize the deal or attempt to decrease the credit spread or coupon rate. Typically, the new issue will be allocated proportionally based on an investor’s percentage of the total demand (e.g. if an investor is 40% of the total demand they are allocated 40% of the new issue by the dealers). Alternatively, when a deal has investor demand that fails to meet the issuers target size, the deal is “undersubscribed”, and the issuer may need to increase the credit spread or coupon rate to increase demand. In the case of an undersubscribed bought deal, the syndicate will buy the principal amount of bonds that has not been purchased by investors.


Following pricing and allocation of a new issue, the offering document is signed and filed and the deal is closed. Settlement agents transfer the proceeds to the issuer and investors receive the bonds. Typically, corporate bonds settle three days following the issue date. Following settlement, the bonds will be listed and can then be traded in the secondary market by investors.