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Flashcards in Eurobonds Deck (9)
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1

What is a Eurobond

Type of bond issued and traded outside jurisdiction of the country whose currency the bond is denominated

Traded internationally/ global markets

Issued in major currencies

Unsecured bonds

Debt instruments

Bearer like characteristics/ traded anonymously

No jurisdiction so no restrictions from that currency

2

Naming of Eurobonds

US = Eurodollar

UK = Eurosterling

Jap = Euroyen

3

Characteristics

Fixed or floating coupons

Bear characteristics = no public register / holdings recorded by clearers agents but not available to gov or tax

OTC (no central exchange)

Bespoke - tailored to country reg regime

Redeemable @ maturity

Possible for principal repaid 1 currency and coupons In another

Listed REI / marketable

Country bond denominated in doesn’t have any controls over it

Long term(5-10 Years usually)

Offered Institutional and individuals alike in primary and secondary markets

4

Reasons why issued

Raise capital international markets

Unable to obtain finance from domestic currency/ country

Issuer can select currency more stable than domestic / favourable tax regimes or less reg requirements

Fixed or floating coupons = flexibility

Finance emerging markets/ development economies

Anonymity of owners/ reduce admin burden

Fund overseas investments

5

How are they issued

Listed on REI (regulated)

Issued primary as new securities and executed placing

Advisors determine process and timescales however trading cannot occur until admitted to listing and trading on exchange approved

Accounts maintained by clearer’s (coupons credited to account and additional purchases debited)

Eurobonds have Nominal amount, maturity date and coupons paid gross

Tax liabilities of holder

Min investment required (US = 500,000)

6

Outline regulation of Eurobonds

International Capital Market Association (ICMA)

Self reg org provide rules and reg on issuance and trading

FCA unable to regulate outside UK but financial entities invoked in issues are

7

Participants of Eurobond Market

Issuer
-party raising finance for specific purpose or multi purposes (cap projects or refinancing)
-look raise in international markets as unable to do at home
-issuers are large international corps and banks with higher credit ratings

Purchases
-investors/ holders
-party that buys the bond from issuer through intermediary in pri or OTC in sec
-individuals seeking LT secure finance

Intermediaries;
-lead manager
-advisors
-banks

8

Outline roles of intermediaries

Lead manager
-issuer approaches investment bank fo manage issue through placing
-join with other banks to form management group (negotiate t/c)
-power/ responsibilities to make issue/ can advise (usually delegate)

Advisors
-experienced agents determine process and timescale
-legal/ law firms oversea listing requirements

Banks
-ensure funds flow from issuer to holder/ payment redemption and coupons throughout life of Eurobond

9

Outline additional points to Eurobonds

Over 75% deals executed in London

Prices change with int rates and currency movements

Settlement T+3 days through clearing houses (record holdings)

Only offered institutional so listing requirements less rigid than other debt secured (Corp bonds)