Issuer

An issuer is a legal entity (e.g., a company, government, or bank) that issues securities such as stocks, bonds, or derivatives in order to raise capital. By purchasing these securities, investors provide the issuer with money, which the issuer then uses for its projects and in return promises investors a return (e.g., interest or dividends) or repayment.

While companies issue shares or bonds to finance their business, governments and municipalities issue bonds to finance their budgets.

The creditworthiness and credit capacity of the issuer determine its credit rating. This is graded by rating agencies, with AAA representing the highest credit quality. The Swiss Confederation, for example, has this top rating. Creditworthiness and credit ratings are crucial for investment security and have a significant impact on interest rates. Ratings up to and including BBB offer what is known as investment grade. If a rating falls below this, for example to BB, B, or even CCC, there is an increased risk that the issuer could get into financial difficulties.

Issuer risk refers to the probability that the issuer of a security will become insolvent and will no longer be able to meet its obligations (e.g., interest payments, repayments). This can lead to losses for investors. For example, in the case of a so-called «haircut.» In this case, creditors must waive part of their claim so that the debtor can survive. In the worst case, no repayment will be made at all.