Bond Circular

A bond circular is a standardized legal document that contains an abbreviated version of the relevant terms from the prospectus of a new bond issue. The bond circular is made available to prospective investors and contains basic information including: issuer, amount of the issue, coupon, use of proceeds and final legal maturity of the bond. A bond circular can also be referred to as an offering memorandum.

A bond circular is an important document that investors can review before deciding whether to purchase a bond, which is a fixed-income investment that helps corporate or government entities finance new projects with bond funds before the bond reaches maturity. At maturity, investors receive their principal investment along with interest.

All securities and mutual funds made available for sale in the U.S. must have an offering circular per the Securities Act of 1933. A bond circular is the term for an offering circular made available for new bonds. It is usually delivered electronically along with the prospectus to potential investors. In addition to the basic information described above, the bond circular describes whether debt is senior or subordinated and how the company plans to use the issue proceeds.

Bond circulars are valuable documents for investors who are considering purchasing a bond. They provide valuable information that can help investors weigh their options, consider the potential performance of a bond and decide if the bond is a worthwhile investment.

A bond circular is distinct from a preliminary prospectus. A preliminary prospectus is merely the first draft of a registration statement for a new security. Though it does provide information on the financial statements, strategic initiatives, ownership and management, the main goal of a preliminary prospectus is to raise interest in the security. Because of this goal, the preliminary prospectus, also known as a red herring, does not contain information as complete and reliable as the bond circular.

A prospectus, however, is the document from which a bond circular is crafted. The final prospectus for a new security is often a longer version of the bond circular with additional details about the company issuing the bond and relevant financial information. In some cases, the prospectus may not provide any additional information than what the bond circular contains. But in other cases the prospectus is a more complete version, and investors may be interested in reading that document, too, to inform their purchasing decision.