Eurobonds are international debt obligations issued by borrowers (international organizations, governments, local authorities, large corporations interested in receiving funds for a long term - from 1 to 40 years (mainly from 3 to 30 years) upon receipt of a long-term a loan on the European financial market in any euro currency.
Eurobonds have coupons, which give the right to receive interest at the agreed time. They may have a double denomination when the interest is transferred in a currency other than the loan currency. Eurobonds can be issued with fixed or floating interest rates.
Eurobonds have the following features:
- These are bearer securities;
- They are issued mainly for a period from one year to 40 years;
- Simultaneous placement of Eurobonds in the markets of several countries is permissible;
- The loan currency is foreign for the issuer and investors;
- Placing and collateral is usually carried out by an emission syndicate, in which banks, investment companies, brokerage houses of several countries are represented;
- The par value is expressed in US dollars;
- Interest on coupons is paid to the owner in full without withholding tax at the source of income, unlike ordinary bonds.
Eurobonds are placed by investment banks, and the main buyers are institutional investors - insurance and pension funds, investment companies.
Eurobonds are divided into two main types: Eurobonds and Euronotes.
Eurobonds are bearer securities that are deposited with depositories under trading systems. They are placed on the markets mainly in developing countries. Collateral is not reserved for Eurobonds, which makes it convenient for issuers to issue them.
Euronotes are registered securities issued by countries with developed market economies. Unlike Eurobonds, the issue of Euronotes provides for the creation of collateral.
Eurobonds can be issued in a variety of forms: with floating and fixed interest rates, with a zero coupon, with the right to convert into other bonds, in a double currency denomination (the face value is expressed in one currency, and interest payments are made in another).
The maturity date of a Eurobond means the period in which the issuer needs to repay most of the debt. A long-term obligation usually assumes that the bond will be redeemed no earlier than 10 years after the issue, while a medium-term obligation assumes a maturity of 1 to 10 years. Liabilities issued for a period not exceeding one year are considered to be short-term. Eurobonds are issued from:
- Single maturity date;
- Several dates;
- Possibility of early repayment.
A rating is required to enter the market. A higher rating allows you to reduce the cost of a loan by setting a lower interest rate. Issued under the laws of the United Kingdom and the State of New York. Interest is paid without deduction of tax on interest and dividends. The tax is paid according to the laws of your country.
