Minimum amount is usually 500000 b why ecp is a form

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Minimum amount is usually $500,000 (b) Why? ECP is a form of inancial disintermediaion and can also be used as a tool for irm that wishes to reduce its FX market risk. By disintermediaing irms wishing to raise money are able to do so without surrendering to the spread required by banks to make a proit and can thus charge less interest than a bank would on a loan while sill ofering borrowers a more atracive rate. ECP can also be traded in a secondary market so lenders are able to get out of their lending if they choose to. They are also a lexible ST inancing agreement without the need for collateral (c) Who? Typically, by large paricipants – governments, govt backed organisaions, large corporaions, banks Holders – central and commercial banks, investment funds, NBFIs Not always a bank involved 3. Euro Notes (a) What? Euronotes are unsecured promissory note with a longer term to maturity than ECP (2-4 years). They are also bearer instruments and interest is usually paid semi-annually, euro once again refers to the fact that they are issued in currencies other than the domesic currency of the country in which they are issued. Distributing prohibited | Downloaded by K C ([email protected]) lOMoARcPSD|2330446
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(b) Who? Issuers: govts, govt-backed, banks, large corporaions, NBFIs Holders: Central and commercial banks, NBFIs 4. Internaional Bonds (a) Types Eurobond: Eurobond issue is underwriten by an internaional syndicate of banks and other inancial insituions and is sold in countries other than the country in which the issue is denominated. Emerged for similar reasons to EC market: absence of regulaions, less stringent disclosure, favourable tax status and interest income not subject to income and withholding tax Eurobond is a bond denominated in a currency other than the currency of the country in which it is issued, usually grouped together by country in which they are denominated and issued by a syndicate of FIs, one of which may underwrite the bond. Issuers are able to pick countries of issuance based on regulatory market, interest rates and depth of the market. Atracive to investors as they usually have small par values and high liquidity. Trade in bearer form and unregistered, though it is esimated the market holds over $30trillion in outstanding debt. Bearer form makes it easier for investors to avoid regulaions and taxes Foreign Bond: Foreign bond is underwriten by a syndicate consising of members from a single country, is sold primarily within that country and is denominated in its currency. The issuer, however, is foreign. Even if the borrower is not interested in the currency of issue, the funds raised can be swapped for other currencies. Issued in domesic market by foreign enity in domesic currency, typically have higher yields due to increased risks, though can add foreign content to porfolios without FX risk. Can be used by companies who do business in the foreign country, as a means of diversiicaion and to widen the pool of available lenders. Small domesic market makes it more expensive to
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