Debt security whereby the issuer undertakes to pay the lender a fixed capital sum at a specific future date, plus twice-yearly or annual interest payments. Interest payments — generally at fixed rates — may vary over the life of the bond. Debentures are unsecured bonds?.
Main subscriber or arranger of bond or equity issues, a bookrunner gathers and records the orders of the investors. It generally syndicates the issues to other financial institutions.
Shareholder’s capital is amount of cash or assets contributed by shareholders, plus any profits, retained earnings or reserves transferred to the capital account. Banks are allowed to include some types of subordinated debt for their regulatory capital.
A method of increasing a company’s shareholders’ equity. The capital may be increased by issuing new shares for cash or in exchange for assets, such as shares in another company. Existing shareholders may have a pre-emptive right to subscribe for the new shares or this right may be cancelled. A capital increase may be carried out to give new investors an opportunity to become shareholders.
Asset-backed securities for which the underlying asset portfolios are debt obligations: either bonds (collateralised bond obligations) or loans (collateralised loan obligations) or both. The credit exposure underlying synthetic CDOs derives from credit default swaps. The CDOs issued by an individual vehicle are usually divided in different tranches: senior tranches (rated AAA), mezzanine tranches (AA to BB), and equity tranches (unrated). Losses are borne first by the equity securities, next by the junior securities, and finally by the senior securities;
Impairment loss provisions in respect of impaired loans, such as credit cards or personal loans, that are below individual assessment thresholds (too small). Such provisions are established on a portfolio basis, taking account of the level of arrears, security, past loss experience, credit scores and defaults based on portfolio trends.
Bond convertible into the issuer’s shares on terms set at the time of issue.
A pledge of cash or securities required by an intermediary to secure future transactions carried out by a client.
Asset-backed securities for which the underlying asset portfolios are loans secured on commercial real estate.
Unsecured obligations issued by a corporate or a bank directly or secured obligations (asset-backed CP), often issued through a commercial paper conduit, to fund working capital. Maturities typically range from 2 to 270 days. However, the depth and reliability of some CP markets means that issuers can repeatedly roll over CP issuance and effectively achieve longer term funding. Commercial paper is issued in a wide range of denominations and can be either discounted or interest-bearing.