What is a capital note?
A capital note is a short-term bond issued by a company to help pay company liabilities.
When you buy a capital note, you’re loaning money to a company for a fixed period of time in return for regular interest payments on a fixed interest rate (called a ‘coupon rate’).
Capital notes are generally unsecured and ranked ‘subordinated debt’ – which means if the company folds, they have a lower priority of being repaid than bonds, but have a higher priority than ordinary shares.
Before maturity (called the ‘election date’), investors are usually offered new terms for reinvestment, or the capital notes may convert into ordinary shares, usually at a small discount to the market price. You could also choose to be paid back in full, plus the interest.
Find out more about our fixed interest securities.
Interested in online share trading? Find out more at ASB Securities.
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