Definition of Other Instruments

(I) Euronote Facilities

The Euronote facility was a major innovation in the 1980s. It is a cross between a short-term bond and a bank loan. It allows a borrower to issue short-term discount notes via a variety of note distribution mechanisms (Euronotes, Euro CP and Euro CDs) under the umbrella of a medium or long-term commitment from a group of banks. The banks are committed to purchasing the notes at a predetermined rate or maximum margin, if the notes cannot be placed with investors at or under the margin. The issuer thus has access to medium or long-term financing using short-term negotiable securities, which helps reduce the cost of borrowing. The cost is further reduced if the term structure is upward sloping.

Euro commercial Paper

Commercial paper is negotiable, short-term notes or drafts of a governmental agency, bank or corporation. The first Euro-commercial paper dates back to 1971 in response to US regulations on foreign investment. The market really began to develop, though, in the early 1980s and took off in 1986. In fact Euro CP can be considered a refinement on the Euronote facility because it requires no backup credit. Since 1986 Euro CP facilities have outnumbered Euronote facilities by a large margin.

Euro MTNs

Euro MTNs have maturities of one to five years, fixed coupons and are issued under a program agreement or through one or more dealers. They are small denomination bearer paper listed on the London or Luxembourg stock exchanges.