Ibo 06 chapter 3 and 4

International Debt Instruments

The international debt instruments give the borrower variety of different maturities, repayment structures and currencies of denomination. These different instruments vary by source of funding, pricing, structure, maturity and subordination or linkage to other debt instruments.

The important instruments that are used to raise finance are

-> Euro notes
->Eurocommercial papers.
->Medium-term Notes, ->Floating Rate Notes, ->Euro bonds
and
->Euroequities.

Under Euro notes a debt instrument with short-term maturities is structured and placed in the market.

A commercial paper is also a short-term
promissory note issued on unsecurred basis by financial institutions.

Medium-termNotes and Floating Rate Notes are mostly in use.

Eurobonds are usually issued by a syndicate.

Euroequities are a distinct source of raising finance in international financial markets.
Under this issue company offers ownership rights to the buyer.Two classes of equity linked instruments are mainly used namely International
Depository Receipt and Euro-Convertible Bonds.

Indian Companies have been
raising finance through Euro-Bonds and Euro-Equities and have been floating
ADR/GDR.

Explanation.. to above topic....

International Bond market can be categorized into basic types:

(1)Foreign Bond and (2)Euro Bond.

Euro Bond: In Euro bond, a foreign company issues a bond denominated in a currency
which is not the home currency of the investors.

For example, an US company issues
bond and raises capital in Japan denominated in US Dollar.

Foreign Bond: Foreign Bond is a bond where foreign company issues bond denominated
in the currency denomination of the foreign country.

For example, an US company
issues bond and raises capital in Japan denominated in Japanese Yen.