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Corporate Bonds and Debentures
Corporate Bonds and Debentures FCS Vinita Nair Vinod Kothari Company Kolkata: New Delhi: Mumbai: 1006-1009, Krishna A-467, First Floor, 403-406, Shreyas Chambers 224 AJC Bose Road Defence Colony, 175, D N Road, Fort Kolkata – 700 017 New Delhi-110024 Mumbai Phone: 033 2281 3742/7715 Phone: 011 41315340 Phone: 022 2261 4021/ 6237 0959 Email: [email protected] Email: [email protected] Email: [email protected] Website: www.vinodkothari.com 1 Copyright & Disclaimer . This presentation is only for academic purposes; this is not intended to be a professional advice or opinion. Anyone relying on this does so at one’s own discretion. Please do consult your professional consultant for any matter covered by this presentation. The contents of the presentation are intended solely for the use of the client to whom the same is marked by us. No circulation, publication, or unauthorised use of the presentation in any form is allowed, except with our prior written permission. No part of this presentation is intended to be solicitation of professional assignment. 2 About Us Vinod Kothari and Company, company secretaries, is a firm with over 30 years of vintage Based out of Kolkata, New Delhi & Mumbai We are a team of qualified company secretaries, chartered accountants, lawyers and managers. Our Organization’s Credo: Focus on capabilities; opportunities follow 3 Law & Practice relating to Corporate Bonds & Debentures 4 The book can be ordered by clicking here Outline . Introduction to Debentures . State of Indian Bond Market . Comparison of debentures with other forms of borrowings/securities . Types of Debentures . Modes of Issuance & Regulatory Framework . -
Four Decades of Change in the Commercial Paper Market
This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Trends and Cycles in the Commercial Paper Market Volume Author/Editor: Richard T. Selden Volume Publisher: NBER Volume ISBN: 0-87014-399-9 Volume URL: http://www.nber.org/books/seld63-1 Publication Date: 1963 Chapter Title: Four Decades of Change in the Commercial Paper Market Chapter Author: Richard T. Selden Chapter URL: http://www.nber.org/chapters/c1919 Chapter pages in book: (p. 6 - 30) 2 Four Decades of Change in the Commercial Paper Market The Market in 1920 The earliest available estimate of commercial paper outstanding is for July 1918, when the Federal Reserve Bank of New York began reporting end-of-month figures. At that time, outstanding paper of thirty dealers, who presumably handled virtually all commercial paper, was $874 million—probably a record level.' During the next year and a half, outstanding dealer paper grew by nearly 50 per cent, reaching a peak of $1,296 million in January 1920. There was no direct paper until later in that year, when General Motors Acceptance Corporation began borrowing on short-term notes without the assistance of a dealer.2 Table 1 provides perspective on the size of the market at the begin- fling of 1920. The figures show that commercial paper was a distinctly 'See Appendix A for a complete record' of monthly outstandings (without seasonal adjustment), July 1918 to December 1961. Note that before 1948 these data include only paper maturing within seven months. 2A number of other finance companies were borrowing short-term funds at this time through collateral trust notes, which in some cases were placed directly with banks (or possibly other lenders). -
Changing Definition of Debentures – Forcing Impasse for Commercial Papers in Times to Come?
Article Changing definition of Debentures – Forcing impasse for commercial papers in times to come? Nidhi Bothra [email protected] 13th May, 2014 Check at: http://india-financing.com/staff-publications.html for more write ups. Copyright: This write up is the property of Vinod Kothari Consultants P. Ltd. and no part of it can be copied, reproduced or distributed in any manner. Disclaimer: This write up is intended to initiate academic debate on a pertinent question. It is not intended to be a professional advice and should not be relied upon for real life facts. Changing definition of Debentures – Forcing impasse for commercial papers in times to come? Article The new Companies Act 2013 has changed the regulatory face of the corporate India; “raising the bar on Corporate Governance.” The new regulatory changes including need for CSR activities, increased investor protection, greater transparency in business and have been the larger issues of discussion with the elite section of the corporate sector. However smaller refinements in the new Act against the old one have also created quite a buzz. Recently an issue was raised by some members of the legal fraternity on an age old settled issue of the difference between negotiable instruments and transferable/ marketable instruments and whether the new definition of “debentures” u/s 2 (30) of the Companies Act, 2013 now includes instruments such as commercial paper as well. Some of the counsels are holding the view that commercial paper will now be included within the ambit of the definition of debentures forcing people to re-think on a question that must have been concluded some hundreds of years ago. -
Fedwire Securities Service
Federal Reserve Banks Fedwire Securities Service Issuer Guide V1.1 Last Updated - August 2021 Fedwire is a registered service mark of the Federal Reserve Banks 1 African Development Bank 6 Avenue Joseph Anoma, Plateau http://www.afdb.org/ 01 BP 1387 [email protected] Abidjan 01 (225) 20.20.44.44 Côte d‘Ivoire The African Development Bank (AFDB) is a multilateral development bank established in 1963 to encourage sustainable economic growth and reduce poverty in Africa. Regional members include any African country that has the status of an independent state. Non- regional countries that are participants in, or contributing to, the African Development Fund, a separate legal entity administered by the African Development Bank to provide loan financing to regional member countries, may be admitted as non-regional member countries. The United States became a non-regional member of the African Development Bank in 1983 pursuant to the African Development Bank Act. Class Product Interest Minimum Multiple Record Date Payment Date Corresponding Code Description Payment Clearing Memo AFDB Bond Semi-annually $1,000 $1,000 Varies Varies 250 AFNT Note Semi-annually $100,000 $1,000 TBD TBD 250 2 Asian Development Bank 815 Connecticut Street, NW http://www.adb.org/ Washington, DC 20006 (202) 728-1500 The Asian Development Bank (ADB) is a multilateral development bank established in 1966 to promote economic growth, environmentally sustainable growth, and regional integration to reduce poverty in Asia and the Pacific region. The Asian Development Bank is owned by its 67 members, including regional and non-regional members. The United States became a member in 1966. -
Glossary of Bond Terms
Glossary of Bond Terms Accreted value- The current value of your zero-coupon municipal bond, taking into account interest that has been accumulating and automatically reinvested in the bond. Accrual bond- Often the last tranche in a CMO, the accrual bond or Z-tranche receives no cash payments for an extended period of time until the previous tranches are retired. While the other tranches are outstanding, the Z-tranche receives credit for periodic interest payments that increase its face value but are not paid out. When the other tranches are retired, the Z-tranche begins to receive cash payments that include both principal and continuing interest. Accrued interest- (1) The dollar amount of interest accrued on an issue, based on the stated interest rate on that issue, from its date to the date of delivery to the original purchaser. This is usually paid by the original purchaser to the issuer as part of the purchase price of the issue; (2) Interest deemed to be earned on a security but not yet paid to the investor. Active tranche- A CMO tranche that is currently paying principal payments to investors. Adjustable-rate mortgage (ARM)- A mortgage loan on which interest rates are adjusted at regular intervals according to predetermined criteria. An ARM's interest rate is tied to an objective, published interest rate index. Amortization- Liquidation of a debt through installment payments. Arbitrage- In the municipal market, the difference in interest earned on funds borrowed at a lower tax-exempt rate and interest on funds that are invested at a higher-yielding taxable rate. -
Floating Rate Note Examplary Underlying: Underlying Rate
Floating Rate Note Examplary Underlying: Underlying rate In general, Floating Rate Notes (FRN) offer you floating coupon payments based on an underlying interest rate and a redemption at 100% of the nominal value on the redemption date (subject to the credit risk of the issuer). The floating coupon is subject to a minimum coupon (floor). The payout profile is for illustrative purposes only and is based on the assumption that no exceptional cancellation will occur, in accordance with the issuer’s product documentation. Main features of a sample product Currency Term Return USD 3 years Underlying rate, minimum 2.90% p.a. Participation Capital no additional participation Floor at 100% (subject to issuer risk) You may consider an investment in this product, if You look for a way to enhance yield on your cash positions You are familiar with both structured products and fixed income markets You are comfortable being exposed to floating coupon payments based on an underlying interest rate You intend to be invested in this product until its redemption date You wish to be invested in the investment currency of the product. If your reference currency is not equal to the investment currency of the product, the return may increase or decrease in reference currency terms as a result of exchange rate fluctuations Summary of main product- Summary of main product- specific benefits specific risks Quarterly adjustment of the coupon Decreasing underlying rate resulting in lower Floor offering a minimum coupon payment coupon payments (but not below the floor) Full capital protection on the redemption date If the currency of the product is different from your reference currency, the return may increase or decrease as a result of currency fluctuations You are fully exposed to the default risk of the issuer. -
GUIDELINES for the ISSUANCE of CORPORATE BONDS, MUNICIPAL BONDS and COMMERCIAL PAPERS Issued By
GUIDELINES FOR THE ISSUANCE OF CORPORATE BONDS, MUNICIPAL BONDS AND COMMERCIAL PAPERS Issued by: CAPITAL MARKETS AND SECURITIES AUTHORITY - TANZANIA Issue Date: September, 2019 1 Contents 1. INTRODUCTION .................................................................................................................... 5 1.1. Legal and Regulatory Oversight ..................................................................................... 5 1.2. Rationale for the Guidelines ............................................................................................. 6 1.3. General Scope of the Guidelines .................................................................................... 7 PART 1: GUIDELINES FOR THE ISSUANCE OF CORPORATE BONDS ............................... 10 1.1 Scope ...................................................................................................................................... 10 1.2 Prospectus or Offering Memorandum ......................................................................... 10 1.3 Approval and Fees.............................................................................................................. 10 1.4 Other Requirements .......................................................................................................... 10 1.4.1 Solvency Requirements ................................................................................................... 11 1.4.2 Assessment of Leverage ................................................................................................. -
The Federal Reserve's Commercial Paper Funding Facility
Tobias Adrian, Karin Kimbrough, and Dina Marchioni The Federal Reserve’s Commercial Paper Funding Facility 1.Introduction October 7, 2008, with the aim of supporting the orderly functioning of the commercial paper market. Registration for he commercial paper market experienced considerable the CPFF began October 20, 2008, and the facility became Tstrain in the weeks following Lehman Brothers’ operational on October 27. The CPFF operated as a lender- bankruptcy on September 15, 2008. The Reserve Primary of-last-resort facility for the commercial paper market. It Fund—a prime money market mutual fund with $785 million effectively extended access to the Federal Reserve’s discount in exposure to Lehman Brothers—“broke the buck” on window to issuers of commercial paper, even if these issuers September 16, triggering an unprecedented flight to quality were not chartered as commercial banks. Unlike the discount from high-yielding to Treasury-only money market funds. window, the CPFF was a temporary liquidity facility that was These broad investor flows within the money market sector authorized under section 13(3) of the Federal Reserve Act in severely disrupted the ability of commercial paper issuers to the event of “unusual and exigent circumstances.” It expired roll over their short-term liabilities. February 1, 2010.1 As redemption demands accelerated, particularly in high- The goal of the CPFF was to address temporary liquidity yielding money market mutual funds, investors became distortions in the commercial paper market by providing a increasingly reluctant to purchase commercial paper, especially backstop to U.S. issuers of commercial paper. This liquidity for longer dated maturities. -
Sources of Business Finance
CHAPTER 8 SOURCES OF BUSINESS FINANCE LEARNING OBJECTIVES After studying this chapter, you should be able to: • state the meaning, nature and importance of business finance; • classify the various sources of business finance; • evaluate merits and limitations of various sources of finance; • identify the international sources of finance; and • examine the factors that affect the choice of an appropriate source of finance. 2019-20 186 BUSINESS STUDIES Mr. Anil Singh has been running a restaurant for the last two years. The excellent quality of food has made the restaurant popular in no time. Motivated by the success of his business, Mr. Singh is now contemplating the idea of opening a chain of similar restaurants at different places. However, the money available with him from his personal sources is not sufficient to meet the expansion requirements of his business. His father told him that he can enter into a partnership with the owner of another restaurant, who will bring in more funds but it would also require sharing of profits and control of business. He is also thinking of getting a bank loan. He is worried and confused, as he has no idea as to how and from where he should obtain additional funds. He discusses the problem with his friend Ramesh, who tells him about some other methods like issue of shares and debentures, which are available only to a company form of organisation. He further cautions him that each method has its own advantages and limitations and his final choice should be based on factors like the purpose and period for which funds are required. -
Frequently Asked Questions About Commercial Paper and Commercial Paper Programs
FREQUENTLY ASKED QUESTIONS ABOUT COMMERCIAL PAPER AND COMMERCIAL PAPER PROGRAMS Why is commercial paper attractive? Understanding Commercial Paper CP is an attractive funding alternative for issuers for What is commercial paper? several reasons. First, CP issuers frequently use Commercial paper (“CP”) is a term used to refer to CP proceeds to fund short‐term liquidity needs instead short‐term debt securities that are in the form of a of relying on short‐term borrowings under revolving promissory note and have maturities of nine months or credit facilities and other lines of credit from banks. less (although typically 30 days or less). CP is usually Second, CP issuers can easily roll over CP, which means unsecured, issued in large denominations of $100,000, that the proceeds from new issuances are used to pay €100,000, £100,000 or more and sold at a discount from the obligations resulting from maturing issuances. As the face value. CP is typically non‐interest bearing. such, CP issuers can often continue to utilize CP Institutional money market investors, including money proceeds uninterrupted. Third, there are clearly defined market funds, insurance companies and banks, have exemptions from registration under the Securities Act of been the main purchasers of CP, and these purchasers 1933, as amended (the “Securities Act”), for CP. Fourth, are almost always (1) in the United States, either CP programs are relatively straightforward to set up qualified institutional buyers (“QIBs”) or institutional and do not require extensive disclosures. accredited investors (“IAIs”) and (2) in Europe, CP has been attractive to institutional money market qualified investors. -
TREASURY FLOATING RATE NOTE TERM SHEET I. ISSUER United States Treasury II. DATED DATE Last Calendar Day of a Month. III. ISSUE
TREASURY FLOATING RATE NOTE TERM SHEET I. ISSUER United States Treasury II. DATED DATE Last calendar day of a month. III. ISSUE DATE Original issue offerings will be issued on the last calendar day of a month, or the first business day thereafter. Reopening offerings will be issued on the last Friday of a month, or the first business day thereafter. IV. MATURITY DATE Last calendar day of the month two years after the Dated Date. V. MATURITY PAYMENT Principal will be paid on the Maturity Date, or the first business day thereafter. VI. INTEREST DATES Quarterly from the Dated Date, to and including the Maturity Date, on the last calendar day of a month. VII. INTEREST PAYMENTS Interest will be paid on each Interest Date, or the first business day thereafter. VIII. INTEREST: A. ACCRUAL PERIOD From and including, the Dated Date or last Interest Payment date to, but excluding the next Interest Payment date or Maturity Date. B. INTEREST ACCRUAL In general, the interest accrual for a particular calendar day in an Accrual Period shall be the Index Rate computed from the most recent auction of 13-week Treasury bills that took place on a day before the accrual day, plus the Spread, divided by 360, subject to a minimum of zero. However, a 13-week Treasury bill auction whose rate becomes effective in the two business day Lock-Out Period prior to an FRN Issue Date or FRN Interest Date shall be ignored for purposes of calculating the interest accrual on that FRN for that day. Instead, the rate in effect for the Lock-Out Period will be from the most recent 13-week Treasury bill auction result that occurred prior to the start of the Lock-Out Period. -
1 Overview of Derivatives
1 Overview of Derivatives A financial derivative is usually defined as an instrument whose value is derived from some underlying cash market instrument. Familiar examples include • options to { buy (\call options") or { sell (\put options") a specified security or commodity at a specified price on a specified date, and • contracts such as { futures or { options on equity indices such Standard & Poor's 500. Newer examples include structured notes, which are securities whose interest or principal payments depend on market conditions, such as floating rate notes and inverse floaters. Swaps of various kinds are also derivatives. Various kinds of derivative are described by Hull, with both details of how their markets operate and the theory of pricing. 1.1 Exchange-Traded versus Over-the-Counter A significant distinction is that between exchange-traded and over-the-counter (\OTC") derivatives. Derivatives that are traded on an exchange are stan- dardized to promote liquidity. They are \marked to market" as of the close of business every day, and the holder's brokerage account is credited or deb- ited with the day's change in value. The holder is required to keep cash or securities in the account sufficient to cover the next day's possible losses with a very high level of probability; this margin protects the other partici- pants against default by the holder of an \out of the money" position. Each instrument is a contract between the holder and the exchange. The OTC market consists of an informal system of dealers linked by telephone, and allows transactions to be customized to meet the precise needs 1 of the dealers' clients.