Understanding the Role of a Bookrunner in Corporate Bond Issuance

Image by Wilfried Thünker from Pixabay

A bookrunner is an investment bank that issues, markets and sells corporate bonds on behalf of an issuer. The role of the bookrunner in a bond issuance is to promote the sale of bonds to investors, set pricing and determine the structure of payments made by the issuer over time.

What Is a Bookrunner?

The bookrunner will be responsible for all aspects of the transaction, including structuring the deal, underwriting the bond issue, and distributing it to investors.

The role of a bookrunner changed after 2008 with the introduction of credit default swaps (CDS) as a form of insurance on debt instruments like corporate bonds.

CDS are essentially contracts between two parties where one party agrees to pay another if they default on their obligations under certain circumstances.

In order to protect themselves against any losses resulting from defaulted securities or loans held by banks, regulators implemented new rules requiring investment banks that act as dealers during bond issuances (i.e., those who buy large quantities from issuers) provide liquidity support in case there isn’t enough demand for these products once they hit secondary markets.

How Does a Bookrunner Function in a Bond Issuance?

A bookrunner is the lead manager of a bond issuance.

The bookrunner is responsible for structuring the deal, marketing it and delivering it to investors.

The role of a bookrunner can be seen as analogous to that of an investment banker — it’s responsible for raising capital from investors on behalf of an issuer by connecting with potential investor groups.

In exchange, the issuer pays them fees based on how many bonds they manage to sell (also known as “distribution”).

What Are the Responsibilities of a Bookrunner?

A bookrunner is responsible for the overall management of a bond issuance.

This includes:

  • Marketing and distributing the bonds to investors.
  • Pricing and establishing the terms of the bonds, including interest rate and maturity date.

A bookrunner is an investment bank that issues, markets and sells corporate bonds on behalf of an issuer.

They act as a middleman, responsible for selling all of the bonds that are issued by a company to investors. A bookrunner also works with other banks who are known as “co-managers.”

These co-managers help contribute to all of the work involved with issuing corporate bonds, such as research and analysis.

In order to become a bookrunner for bond issuances, you’ll need some experience working in finance or banking.

As you can see, there is a lot that goes into the role of a bookrunner.

This post has covered some of the most important aspects of this role and should help you understand what it means to be a bookrunner.



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