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