Monday, January 25, 1999

INVESTMENT PRIMER


What's a 'bought deal'?

        In securities underwriting, it is a firm commitment to purchase an entire issue outright from the issuing company. It differs from a stand-by commitment, wherein, with conditions, a syndicate of investment bankers agrees to purchase part of an issue if it is not fully subscribed.

        It also differs from a best efforts commitment, wherein the syndicate agrees to use its best efforts to sell the issue. Most issues in recent years have been bought deals.

        Typically, the syndicate puts up a portion of its own capital and borrows the rest from commercial banks. Then, perhaps through a selling group, the syndicate resells the issue to the public at slightly more than the purchase price.

        Have you seen an investment term you'd like to understand better? Write to Ursula Miller, The Cincinnati Enquirer, 312 Elm St., Cincinnati 45202. Phone: 768-8573.

       



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