03 - Debt

  1. Trade Credit
    A supplier provides goods to a purchaser with an arrangement for payment at a later date.
  2. Margin
    The interest charge above a specified reference interest rate that reflects the credit risk of a borrower.
  3. Prime Rate
    Reference of interest rate set by a financial institution for the purpose of pricing certain variable-rate loans.
  4. USCP
    United States Commercial Paper

    Discounted securities.
  5. Fully Fluctuating Basis
    Requirement that an overdraft be brought back into credit from time to time.
  6. Collateral
    Property or other assets pledged to a lender as security to support a loan.
  7. Acceptor
    Bank that puts its name on the face of a bill and takes primary liability to repay the holder at maturity.
  8. Payee
    The party who receives the funds when a bill of exchange is initially discounted.
  9. Discounter
    Party who purchases a bill of exchange.

    Provider of funds.
  10. Endorser
    Party that signs the reverse of a bill when selling a bill.

    Creates a legal chain of ownership.
  11. Bill Line
    Arrangement whereby a bank agrees to progressively discount bills up to an agreed amount.
  12. Promissory Notes (P-Notes)
    Discount securities issued by corporations without an acceptor or endorsement.
  13. Commercial Paper
    Promissory notes (discount securities) issued into the money market by corporations with a good credit rating.
  14. Revolving Facility
    Rollover arrangement.

    As existing P-notes mature, new notes are issued and discounted.
  15. Lead Manager
    The arranger of a syndicated debt facility, who structures the issue, forms the syndicate and prepares documentation.
  16. Dealer Panal
    Panel members promote and distribute debt issues to clients and maintain a secondary market in the paper.
  17. Underwriting Syndicate
    Promoters of an issue who agree to purchase paper that is not taken up by the tender panel.
  18. Floor Plan Finance
    Provision of finance for stock on a showroom floor.
  19. Bailment
    Situation where a finance company holds title to a dealership's stock.
  20. Accounts Receivable Financing
    Loan obtained by a firm using current accounts receivable debtors as security to supportĀ the loan.
  21. Factoring
    The sale, at a discount, of a firm's accounts receivable assets to raise funds.
  22. Factor Company
    Typically, a finance company that purchases a firm's accounts receivables.
  23. With-recourse Factoring
    The factor company can recover future accounts receivable bad debts from the firm.
  24. Notification Basis
    A firm must notify debtors that accounts receivable should be paid directly to the factor company.
  25. Non-notification Basis
    Accounts receivables are paid by a firm's debtors directly to an address controlled by the factor.
  26. Term Loan
    Loan advanced for a specific period.

    May include a fixed or variable interest rate.
  27. Fully Drawn Advance
    Term loan where the full amount is provided at the start of the loan.
  28. Credit Foncier Loan
    Loan with interest and principal repayments that are amortised over the term of the loan.
  29. Deferred Repayment Loan
    Repayment commences after a specified period (project becomes cash positive).
  30. Service Fee
    Charged by a lender to offset ongoing loan account administration costs.
  31. Commitment Fee
    A charge on any portion of a financing facility that has not been drawn down.
  32. Line Fee
    Charged on the total amount of funds advanced to a borrower.
  33. Loan Covenant
    Conditions or restrictions placed on a borrower and specified in a loan contract.

    • Positive - actions taken by borrower.
    • Negative - restrict the activities and financial structure of the borrower.
  34. Interest Cover
    Higher ratio = lower risk

    loan interest payments / borrower's income
  35. Mortgagor
    The borrower who assigns security over the loan and the property thereon to a lender.
  36. Mortgagee
    The lender who registers an interest in land and property thereon as security for a loan.
  37. Right of Foreclosure
    The right of a lender to take possession and sell an asset to recover any amount owing on a loan.
  38. Mortgage Insurance
    Insurance cover that protects a lender in the event that a borrower defaults on a mortgage loan.
  39. Loan-to-Valuation Ratio (LVR)
    % ratio of a loan in the bank's valuation of the property being mortgaged.
  40. Special-purpose Vehicle
    Rust established to hold securitised assets and issue asset-backed securities.
  41. Semis
    Bonds issued by state government borrowing authorities in Australia.
  42. Covered Bonds
    Issued by commercial banks that are supported or secured by mortgage assets held by the bank.
  43. Unpledged Assets
    Assets of a company over which no interest has been conveyed to another party.
  44. Fixed Charge
    The assets of the borrower which cannot be sold until bond holders have been repaid.
  45. Floating Charge
    Allows certain assets over which security is held to continue to be sold in the normal course of business.
  46. Crystallise
    If a borrower defaults then a floating charge converts to a fixed charge over all unplugged assets of a company.
  47. Debenture Trust Deed
    Specifies and protects the underlying security attached to a debenture bond issue.
  48. Information Memorandum
    Limited information provided to institutional investors with a private placement debt issue.
  49. Subordinated Debt Issue
    Long-term debt issue.

    Holder's claims are subordinated against all other creditors, but before equity holders.
  50. Quasi-equity
    Security that has the attributes of both debt and equity.
  51. Lines of Credit
    Financial arrangement established to provide a source of funds in the future.
  52. Interest Capitalised
    Interest payments due, but deferred, are added to the total amount owing.
  53. Operating Lease
    Short-term lease.

    Asset may be leased many times.

    Asset maintained and insured by lessor.
  54. Full-service Lease
    Lessor is responsible for the insurance and maintenance of the leased asset.
  55. Net Lease
    The lessee is responsible for the insurance and maintenance of the leased asset.
  56. Sale and Lease-back Arrangement
    Asset is sold to a lessor on condition it is leased back to the previous owner.
  57. Cross-Border Lease
    A lessor in one country leases an asset to a lessee in another country.
  58. Direct Finance Lease
    Lessor purchases an asset and leases it directly to a lessee.
  59. Leasing Guarantee
    Agreement by a third party to meet the commitments of the lessee in the event of a default.
  60. Leveraged Finance Lease
    Lessor partnership borrows a substantial portion of funds required to buy an asset for leasing.
  61. Foreign Exchange Risk
    The risk that the value of one currency relative to another currency will change.
  62. National Foreign Currency Hedge
    Strategy that matches the denomination of foreign currency inflows and outflows.
  63. Revolving Credi
    Debt rollover facility for a specified number of periods.
  64. Standby Facility
    Contingency line of credit that is established with a financial institution.
  65. Syndicated Loan
    Provision of loan funds by a group of financiers for a single project.
  66. Co-managers
    Assist the lead manager of a syndicated debt facility.
  67. Participating Banks
    Banks that provide funds as part of a syndicated loan facility.
  68. Agent Bank
    Conducts the ongoing administration role of an established syndicate loan facility.
  69. Availability Period
    The period specified in a loan contract in which the borrower can draw down a loan.
  70. Euronote Issuance Facility (NIF)
    P-notes are underwritten and issued into the Euromarket.
  71. Tender Panel
    Group of banks that agree to make a market in a particular security.

    Quote bid and offer prices.
  72. Posted Rate
    The quoted yield at which an issuer is willing to sell a security.
  73. Definitive Notes
    Securities issued in their physical form.

    Bearer securities.
  74. Global Notes
    Securities issued and controlled through an electronic clearing house.
  75. Eurocommercial Paper (ECP)
    P-notes that are not underwritten are issued into the euromarkets.
  76. Tranches
    Larger issue of paper (debt) is broken up into smaller packages of securities with the same features and sold progressively over time.
  77. Medium-term Note (MTN)
    Unsecured, non-homogenous bears security that pays a periodic coupon.

    Issued in tranches.
  78. Quoting Two-way Prices
    Practice of a dealer quoting both bid and offer prices on a financial asset.
  79. MTN Tap Approach
    Each tranche within a euro-man issue incorporates specific maturities and coupon rates.
  80. Serial Offering Technique
    Each series tranche has the maturity and coupon terms set when the facility is established.
  81. Domestic Bond
    Issued into a local market, in local currency, by a local company.
  82. Foreign Bond
    Issued into a foreign market, in the currency of that market.
  83. Management Group
    Comprises the lead manager and co-managers.
  84. Subscribers to an Issue
    Agree to purchase some of the securities offered.
  85. Red Herring
    Preliminary prospectus prepared by the lead manager.
  86. Tombstone
    Notice placed in the financial press advising details of a completed issue of securities.
  87. Grey Market
    Contingent trading in a security before the actual closing date of the primary issue.
  88. Bearer Bonds
    Physical stock is issued.

    Current holder is assumed to have legal entitlement.
  89. Inscribed Stock
    The physical bond is not issued.

    Ownership is registered electronically with a registry.
  90. Straight Eurobond
    Fixed-interest bond paying periodic coupons.

    Principal repayable at maturity.
  91. Bullet Repayment
    The principal amount due on a security is repaid only on the maturity date.
  92. Paying Agents
    Arrange periodic coupon payments when due.

    Redeem bonds at the maturity date.
  93. Euro Floating Rate Note (FRN)
    Bearer bond that has a variable coupon rate based on a reference interest rate.
  94. FRN Option
    Call - Issuer has right to redeem a bond issue before the maturity date.

    Put - Investor has the right to sell the bond back to the issuer prior to maturity.
  95. Trust Indenture
    Appoints a qualified trustee and specifies a range of conditions designed to protect debt security holders.
  96. Credit Enhancements
    Financial arrangement such as a letter of credit that supports an underlying security issue.
  97. Book-entry US Commercial Paper (USCP)
    Electronic recording of USCP issues and payments.
  98. Yankee Bond
    Foreign bond issued into the US capital markets.

    Issued in USD by a foreign borrower.
  99. Junk Bond Market
    Issue of securities with a credit rating of less than investment grade of BBB.
  100. Shelf Registration
    Registration with the Securities and Exchange Commission (SEC) of a delayed or continuous debt issue.
  101. American Depository Receipt (ADR)
    Security (depository share) issued by a US depository bank that is supported by shares held of a foreign listed company.
  102. Depository Share
    Represents ordinary shares of a foreign company listed on a foreign stock exchange.
  103. Obligor
    Party who is bound to another by a contract or other legal procedure.
  104. Rating Symbols
    Credit rating

    • S&P long term - AAA to D
    • short term - A-1 to D
  105. Investment Grade
    Debt issue with a credit rating of BBB and above.
  106. Issue-specific Credit Rating
    Opinion of the creditworthiness of an obligor with respect to a specific financial obligation.
  107. Country Risk
    Changes in the laws of a foreign country will impact upon existing financial transactions.
  108. Credit Watch
    Advice to the market that a credit rating is under review.

    May be positive or negative.
Card Set
03 - Debt
230 - Debt