The debt capital market (DCM) represents the credit market, also known as fixed income securities. This market is widely used by companies and governments to raise funds to finance their activities and investments. This practice is necessary when a company identifies the need for money, not only to carry out debt, but also to raise funds for the development of new projects that the company deems to have an attractive return.
In the case of companies, the most common funding format is through the issuance of debentures, debt securities, usually medium and long term, which have as remuneration to investors a defined rate plus a variable index, which is usually the SELIC or IPCA.
As it is a credit operation, the investor must monitor the risks of a default. Debentures generally have a risk rating issued by a rating agency¸ a company responsible for analyzing the company’s conditions in honoring its financial commitments. The debentures are subject to risk reclassification, usually annually, in which the profitability of the operation can be changed, upwards, if the risk increases, or downwards, if the credit risk decreases.
