Please enable JavaScript.
Coggle requires JavaScript to display documents.
Eurobonds (Characteristics (May be issued with either fixed or floating…
Eurobonds
Characteristics
-
Provide anonymity to purchasers as there are no public registers. Therefore an issuer does not know who holds its Eurobonds
-
OTC products, having no central exchange. Dealing is done by telephone and computer terminals using brokers
Redeemed at maturity upon presentation to the issuer by a holder or a third party acting on behalf of the holder
Listed on recognised exchanges but as they are bearer-like bonds, there is no central register, holdings are recorded by the clearers
It is possible that the principal is redeemed in one currency whereas coupons are paid in another currency
The country in whose currency the Eurobond issue is denominated will have no jurisdiction over that bond issue
Issuance
This will initially be in the primary market as a new issue of securities and will be executed by means of a placing
-
-
Have a nominal amount, face value, maturity date and coupon
-
Coupons are paid gross without deduction of taxes. Any tax liabilities are the responsibility of the holder
Minimum investment tends to be in the region of $500,000
Reasons for issue
-
Issuers may not be able to obtain finance from their domestic banks or issue bonds in their domestic market
Issuers may wish to select countries with favourable tax regimes or with less tough regulatory requirements compared to those of the home country
The selection of a currency in which the Eurobond is denominated is more stable than the currency of the country of the issuing party and consequently the Eurobonds will be far more marketable
-
Held anonymously, there is therefore no requirement for the issuer to maintain a central register of holders, this results in a reduction of the administrative cruder for the issuer
-
A bond which is issued and traded outside the jurisdiction of the country in whose currency the bond is denominated
-
The Eurobond market is now a vital source of finance for large national corporations, multinational corporations, supranational organisations and sovereign states, particularly those of emerging markets and developing countries
The Eurobond market provides borrowers with access to a vast pool of medium to long term international debt capital
-
Have bearer-like characteristics and are issued in countries other than those of the currencies in which the Eurobonds are denominated
-
Specialist medium to long term (5-10 years), unsecured and highly rated debt securities used as a means of raising capital in international rather than domestic markets and are fully negotiable
Intended for institutional investors and are only offered to institutional investors in the primary market
-
-
Regulated by the International Capital Market Association which is a self regulatory organisation providing rules and regulations on issuance and trading
In the UK the FCA is not able to regulate Eurosterling bonds as these are issued outside of the UK's jurisdiction. However any UK financial entities involved in Eurobond issuance will be regulated by the FCA
If the currency of the country where the bond is issued depreciated significantly against the currency of denomination of the Eurobonds, this may be very serious as the issuer may incur significant exchange rate losses
-
-
-
Settlement is done through two separate and independent clearing houses, Euroclear and Clearstream which will record holdings