The debt collector, also known as book runner, is a bank or set of banks that guarantee to achieve the best possible result in a debt issue or shares in the primary market. It is a term widely used in investment banking.
It is a process that takes place in capital markets , and is very well valued and received by institutional investors. Among its many functions, are to give the issuer the best possible price and a well-diversified investment base.
The work of the setters ( book runners ) can be done in three ways:
- Order book method:Investor requests are recorded in an order book.
- Underwriting method:in this case the placement banks buy the bonds or shares from the issuer, and then place them among the investors. Therefore, the risk is assumed by the banks exposing themselves to market fluctuations (selling later in the secondary market at a higher price) and the issuer at that same time closes its financing at the agreed price.
- Bridge loan:when the two previous methods are used.
In investment banking, it is normal for this process to be carried out by a bank syndicate (several banks at the same time), to diversify risks and to reach a larger investment base. They are responsible (according to the method used) for the placement of the debt or the shares. The figure of the setter is often assigned parts of the issue to other banks to carry out the process of attracting investors.
The roadshow : broadening the investor base
Once the investor has assigned a bank or several banks as placement agents, they have the mandate to hold meetings, presentations, conferences, etc., that is, the roadshow .
These actions carried out by the underwriters are neither more nor less, than to attract investors, expand the investment base and publicize the issue. The more people go to the broadcast, there will be greater demand and the price will be higher.