When a firm or a government issues a security, when it is in the form
of a bond, as opposed to a stock, the issuer is effectively taking out
a loan from the purchaser of the security because the issuer is
obligated to return the purchaser's money (as well as interest
pursuant to the terms of the bond) when the security matures.
In most cases, firms do not directly sell securities to the public.
Instead, they sell them to investment banks who then proceed to sell
them to their customers. Governments do the same, although at least
in the case of the US government, the Treasury Department also does
sell bonds directly to the public.
Therefore, when an investment bank assists a firm or government with a
sale of securities in the form of bonds, the investment bank is
effectively processing a loan from the ultimate purchasers of the
bonds to the company or government issuing the bonds.
I hope this clarifies the meaning of the sentence for you.
Wonko |
