Introduced by Assoc. Pr. Dr. Truong Quang Thong The Faculty of Banking – UEH August 2012 INTERNATIONAL FINANCE TÀI CHÍNH QUỐC TẾ Lecture 5: The International Debt Markets 1 About the Int’ Debt Markets Offering the borrowers a variety of different maturities, repayment structure, and currencies of denomination. The markets and their many different instrument s vary by source of funding, pricing structure, maturity and subordination or linkage to other debt and equidty instrument. 2 Three major sources of debt funding International bank loan and syndicated credits. Euronotes markets. International bond markets 3 International bank loans International bank loans: traditionally sourced in the Eurocurrency markets. Eurodollar credits / eurocredits. Key factor: very narrow spread, often less than 1%. 4 International bank loans – Some special conditions Management fee / Arrangement fee / Up front fee. Commitment fee Grace period. Pre-payment penalty. Negative pledge. 5 Syndicated credits. Enabling banks to spread the risk of very large loans among a number of banks. Important because many large MNCs need credit in excess of a single bank ‘s loan limit. Arranged by a lead bank 6 Euronotes markets Euronote markets: collective term used to describe short to medium debt instruments courced in the Eurocurrency markets. Euronotes facilities. Euro-Commercial paper (ECP). Euro medium-term notes (EMTNs) 7 International bond markets A rich array of innovative instruments created by imaginative investment bankers. Key features compared with international banking market: the quantity and cost of funds. Two generic classifications: Eurobonds Foreign bonds 8 Unique Chracteristics of Eurobond Markets Absence of regulatory interference: governments in general have less stringent limitations for securities denominated in foreign currencies. Less stringent disclosure: much less stringent than those of the SECs. Favorable tax status: tax anonymity and flexibility. 9 . Quang Thong The Faculty of Banking – UEH August 2012 INTERNATIONAL FINANCE TÀI CHÍNH QUỐC TẾ Lecture 5: The International Debt Markets 1 About the Int’ Debt Markets Offering the borrowers. instrument. 2 Three major sources of debt funding International bank loan and syndicated credits. Euronotes markets. International bond markets 3 International bank loans International bank loans:. currencies of denomination. The markets and their many different instrument s vary by source of funding, pricing structure, maturity and subordination or linkage to other debt and equidty instrument. 2 Three