International financial market instruments

Presented by:- Vikesh Jha Ranjit Singh Jitendra Sahu

Types

International bonds Foreign bonds & euro bonds Global bonds Straight bonds Floating rate notes Convertible bonds Cocktail bonds

Types

Short & medium term instruments Euro notes Euro commercial paper Medium term euro notes

OTHERS

ADR GDR

Foreign bonds & euro bonds

Foreign bonds are underwritten by the underwriters of the country where they are issued

Maturity based on the need of investors of a particular country.

Foreign bonds are subjected to government regulations in the country where they are issued.

DIFFERENCES

If an indian company issue bond in the new york and bond is dominited in US dollar, is called foreign bonds. But in case of euro bonds they are dominited in currency other than the currency of the country where the bonds are issued.

Foreign bonds underwritten by the underwriters of the country. Euro bonds underwritten by the underwritters of multi nationality

DIFFERENCES

Foreign bonds subjected to governmental rules and regulations but euro bonds are free from rules and regulations.

Foreign bonds is determined keeping in mind the investors of a particular country. On

the other hand euro bond are tailored to the needs of the multinational investors.

Global bonds

First it issued in 1989 by world bank It also issued by the company It dominated in 7 country’s currency Australian dollar Canadian dollar Japanese yen Swidish crona Euro

Global bonds

Bonds that can be offered within the euromarket and several other markets simultaneously.

Unlike Euro bonds, global bonds can be issued in the same currency as the country of issuance.

For example, a global bond could be both issued in the United States and denominated in U.S. dollars.

Features

Eurobonds underwritten by an internationally. offered simultaneously to investors in a

number of countries . issued outside the jurisdiction of any single

country. they are not registered through a

regulatory agency. Make coupon payments annually. Large in size offered for simultaneous

placement in different countries

Straight bonds

Interest rate is fixed known as coupon rate

It is a traditional type of bondiIts varities:--Bullet-redemption bond-Rising-coupon bond-Zero-coupon bond-Currency options-Bull and bear bonds.-Debt warrant bonds

Floating rate notes

Does not carry fixed rate of interest Interest quoted as a premium or

discount to a reference rate(LIBOR) Interest rate revised periodically. Perpetual FRNs Minimax FRN Drop lock FRN Flip flop FRN Mismatch FRN Hybrid fixed rate reverse FRN

Convertible bonds

Convertible into equity sharesSome convertible bonds have

detachable warrants involving acquisition rights

Automatic convertibility into a specified number of shares.

Coctail bonds

Denominated in a mixture of currencies.

Represent a weighted average of 5 currencies

Investors get currency diversification risk

Depreciation offset by appreciation of other.

Euro notes

Like PNs for obtaining short term funds.

Denominated in any currency other than the currency of the country where they are issued.

Documentation facilities are minimum.

Represent Low cost funding route. Investor too prefer them in view of

short maturity.

Euro commercial notes

A short-term, debt instrumentCorporations issue eurocommerical

papers in order to tap into the international money markets for their financing.

An example of a eurocommercial paper is a British firm issuing debt in U.S. dollars to encourage investment from dollar-investors in international money markets.

Medium term euro notes

Longer maturity between 1 year to 5 years.

Short term euro notes are allowed to roll over.

Issued to get medium term funds in foreign currency without any need for redemption and fresh issue.

It is not underwritten yet there is provision for underwritting.

It carry fixed interest rate

ADR’S

Represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets

ADRs carry prices in US dollars, pay dividends in US dollars, And can be traded like the shares of

US-based companies. JPMorgan Citibank Deutsche Bank Bank of New York Mellon

GDR’S

Global Depository Receipt (GDR) - certificate issued by international bank, which can be subject of worldwide circulation on capital markets.

GDR's are emitted by banks, which purchase shares of foreign companies and deposit it on the accounts.

Global Depository Receipt facilitates trade of shares, especially those from emerging markets.

Prices of GDR's are often close to values of realted shares.

Very similar to GDR's are ADR's.

Procedure of issue

Deciding the size of the issue , the market of the issue , price of the issue and the formalities involved.

Approaching a lead manager Fulfilling the formalities and preparing the

prospectus. Depositing shares to be issued with the

custodian Custodian asks depository located in foreign

country to issue DR Proceeds flow from depository to custodian

bank to issuing company

Documentation

1. The prospectus 2.The depository agreement 3. The agreement between the

custodian and depository. 4.The underwriting agreement 5. A copy of the agreement with the

listing stock exchange.