Issuable in series: Overview, definition, and example
What does "issuable in series" mean?
Issuable in series refers to the ability of a company or entity to issue multiple, distinct sets or series of securities, such as bonds, shares, or other financial instruments, under a single offering or registration. Securities that are "issuable in series" are typically issued at different times, with each series having its own terms, such as interest rates, maturity dates, or dividends. This feature is commonly used for bonds and preferred stock, allowing the issuer to raise capital in stages, each series offering distinct conditions based on market conditions or the company’s funding needs.
For example, a company may have the right to issue a series of bonds in smaller tranches over time rather than issuing all bonds at once. Each tranche (or series) could have different terms, such as different interest rates or maturities, based on the prevailing market conditions or the company's financial strategy at the time of issuance.
Why is "issuable in series" important?
The "issuable in series" structure is important because it provides flexibility for issuers when raising capital. It allows them to issue securities in stages, accommodating changing financial needs, market conditions, or business strategies. For investors, this structure offers opportunities to invest in securities with different characteristics, such as varying risk profiles or returns, depending on the series issued.
This flexibility can be particularly useful for companies with long-term funding needs or those operating in fluctuating financial markets. Issuing securities in series can also help a company manage its debt levels, maturity schedules, and cash flows more effectively.
Understanding "issuable in series" through an example
Imagine a company, ABC Corp, that wants to raise capital through the issuance of bonds. Instead of issuing all the bonds at once, ABC Corp opts to issue the bonds in series. The first series of bonds is issued with a 5-year maturity and an interest rate of 4%, while the second series, issued a year later, has a 7-year maturity with a slightly higher interest rate of 4.5%.
This "issuable in series" approach allows ABC Corp to adjust the terms of the bonds based on current market conditions and its funding needs at the time. As a result, the company is able to secure favorable terms for each series while spreading out its debt obligations over time.
Example of issuable in series clause
Here’s an example of how an "issuable in series" clause might appear in a bond indenture or offering document:
"The Company may, at its discretion, issue additional bonds under this indenture in one or more series, each with such terms and conditions as determined by the Company at the time of issuance. Each series may have different interest rates, maturity dates, and other specific terms, and shall be issued in accordance with the conditions set forth in this Agreement."
Conclusion
"Issuable in series" is a flexible financing structure that allows companies to raise capital in stages, with each series having distinct terms. This method is beneficial for both issuers and investors, as it allows for better alignment with changing market conditions and business strategies. For issuers, it offers flexibility in managing capital, debt schedules, and cash flows. For investors, it provides opportunities to choose securities based on specific investment preferences, such as risk levels, returns, or maturity dates.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.