easy · Debt Capital Markets primary-issuance-syndication

A bank is 'pitching' a bought deal to a client. The client asks: 'What happens if the book is only 0.5x covered at our target price?' The bank's response in a bought deal is:

1. 'We still pay you the full amount at the agreed price and take the unsold bonds into our own inventory.'
2. 'We cancel the entire deal outright and you receive no proceeds whatsoever from this issuance.'
3. 'We automatically lower your coupon mid-trade so the cheaper bonds attract additional buyers and fill the book.'
4. 'You must pay us an additional 2% underwriting fee so that we can go and source more investors.'

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