Loans and money issues

Yet another method of hedging for corporations is to match assets and liabilities: if a firm has an asset (such as a foreign operation) that has a net present value of €100, then it can create a liability that is also worth €100. The easiest way to do this is to raise the financing for the asset not in U.S. dollars but in euros. If an operation has borrowed €100 and is worth €100, the currency risk on the assets itself almost disappears: currency risk remains only in the earnings performance of the euro subsidiary.
If we raise this capital in the foreign host country itself, it may also mitigate political risk: if a revolution were to occur in Germany and our operations were nationalized, chances are that we would not be liable to pay German investors and lenders. This type of hedge is accomplished with foreign bonds, which have been around for at least a hundred years. They are issued by corporations foreign to the host country in which they are issued and denominated in host country currency. They are named differently in different countries— Yankee Bonds in the United States (i.e., issued by a non-U.S. corporation), Samurai Bonds in Japan, matador bonds in Spain, and Bulldog Bonds in Great Britain. For example, when Ford Motors issues a Japanese- yen bond in Tokyo, it would be a Samurai Bond.