The "five years" indicates the time to maturity from the settlement date—when the final principal and last interest payment will be made. “SOFR plus 180 bps p.a.” describes the bond’s floating coupon rate: the reference rate (SOFR) plus a fixed spread of 180 basis points. This identifies the nature of the coupon, not a yield measure or a contingency.

Covenant 1 requires the issuer to take specific actions (i.e., maintain assets), which is a typical example of an affirmative covenant. Covenant 2 restricts the issuer from performing an action (i.e., paying dividends under certain conditions), which classifies it as a negative covenant. Affirmative covenants require issuers to do certain things, while negative covenants restrict specific actions to protect bondholders.

The monthly interest payment is based on the coupon rate and the par value of the bond, not the purchase price. The annual coupon payment is 6% × $1,000 = $60. Since interest is paid monthly, the monthly payment is $60 ÷ 12 = $5.00.

Corporate bonds that are secured by company assets still depend mainly on the issuer’s operating cash flows for repayment. The security provides a secondary claim for investors in case the firm defaults. Asset-backed securities, on the other hand, are issued through SPVs and repaid from cash flows of pooled receivables—not applicable here.

Floating-rate notes (FRNs) typically have a coupon that resets periodically based on a reference rate (such as EURIBOR) plus a fixed spread that is determined at issuance. In this case, AuroraTech SE’s FRN includes a fixed spread of 200 basis points over EURIBOR. Even though the firm's credit risk has increased—as reflected by a rise in its market credit spread and a credit downgrade—the coupon on the FRN does not adjust to reflect this.

The spread component (200 bps) remains constant over the life of the bond. Only changes in the reference rate (EURIBOR) will affect the coupon payments going forward. Therefore, while the market price of the FRN may decline to reflect increased credit risk, the coupon payments remain based on EURIBOR + 200 bps, regardless of changes in the issuer’s credit quality. This is a key distinction from fixed-rate bonds where yields in the market rise with perceived credit risk, but for FRNs, that risk is more often reflected in pricing rather than in coupon adjustments.

Floating-rate bonds (also called floating-rate notes or FRNs) have coupon payments that reset at regular intervals—typically quarterly or semiannually—based on a reference rate such as LIBOR, SOFR, or EURIBOR, plus a fixed spread. This structure makes their interest payments variable over time and responsive to market conditions.

Zero-coupon bonds, by contrast, pay no periodic interest and are issued at a discount to face value. Inflation-linked bonds adjust principal or coupon payments based on changes in an inflation index, but they do not reset periodically based on a reference interest rate.

To calculate the final payment on the maturity date, we must add the last quarterly interest payment to the repayment of the bond’s principal:

Step 1: Calculate the total coupon rate
SARON = 0.25%
Spread = 2.50%
Total coupon rate = 2.75%

Step 2: Calculate the annual interest
Annual interest = CHF250,000,000 × 2.75% = CHF6,875,000

Step 3: Determine the quarterly interest payment
Quarterly interest = CHF6,875,000 ÷ 4 = CHF1,718,750

Step 4: Calculate the total payment at maturity
Principal repayment = CHF250,000,000
Final interest payment = CHF1,718,750
Total payment = CHF 251,718,750

A pari passu clause means “on equal footing.” It ensures that all debt instruments within the same seniority and collateral class (in this case, secured and unsubordinated) rank equally in terms of claim priority for interest and principal payments. The timing of issuance does not affect priority. Therefore, both the new and existing secured, unsubordinated debt will have the same payment rights in the event of default or liquidation.