Debt Capital Market Lecture Notes
LECTURE 2
Debt exists of one of two broad types of claims on a business, Equity and Debt. That is ownership claims (or the right to any and all residual asset value after all prior claims are met) and prior ranking claims known as debt. Equity is typically a form of permanent capital in the capital framework of a company while debt is typically nonpermanent with a variety of forms. This course focuses on Dept with special emphasis on the Debt Capital Markets.
A debt instrument is a document that in it’s simplest form is a promise to repay an amount of borrowed money plus interest.
Most commercial enterprises source their term debt from either banks or the capital markets. Bank debt is intermediated debt (that is provided by an intermediary) and generally provided to borrowers on either a bilateral or a syndicated basis. Debt
Capital Markets provide debt directly as either corporate or securitised debt.
Bank debt is a loan provided by the borrower’s bank(s), which pays interest on a regular basis. A key feature of most debt facilities provided by banks is one of flexibility. That is often the debt can be borrowed and repaid without penalty and redrawn at a later time, this is known as a revolving facility. Banks can also lend on a single draw basis but often allow borrowers to repay such loans without penalty. A large amount of bank debt is provided bilaterally, that is between one bank and one borrower. Syndicated bank debt or a syndicated loan involves more than one bank lending under common documents having common terms. Typically an agent administers the loan and often acts as the security trustee. Syndicated loans are often for larger transactions and can be secured or unsecured.
17
Overview
In its broadest sense a Debt Capital Market is a market for dis-intermediated debt instruments, that is debt instruments other than bank loans. Debt Capital Markets are not created but rather evolve with the characteristics appropriate to
Debt exists of one of two broad types of claims on a business, Equity and Debt. That is ownership claims (or the right to any and all residual asset value after all prior claims are met) and prior ranking claims known as debt. Equity is typically a form of permanent capital in the capital framework of a company while debt is typically nonpermanent with a variety of forms. This course focuses on Dept with special emphasis on the Debt Capital Markets.
A debt instrument is a document that in it’s simplest form is a promise to repay an amount of borrowed money plus interest.
Most commercial enterprises source their term debt from either banks or the capital markets. Bank debt is intermediated debt (that is provided by an intermediary) and generally provided to borrowers on either a bilateral or a syndicated basis. Debt
Capital Markets provide debt directly as either corporate or securitised debt.
Bank debt is a loan provided by the borrower’s bank(s), which pays interest on a regular basis. A key feature of most debt facilities provided by banks is one of flexibility. That is often the debt can be borrowed and repaid without penalty and redrawn at a later time, this is known as a revolving facility. Banks can also lend on a single draw basis but often allow borrowers to repay such loans without penalty. A large amount of bank debt is provided bilaterally, that is between one bank and one borrower. Syndicated bank debt or a syndicated loan involves more than one bank lending under common documents having common terms. Typically an agent administers the loan and often acts as the security trustee. Syndicated loans are often for larger transactions and can be secured or unsecured.
17
Overview
In its broadest sense a Debt Capital Market is a market for dis-intermediated debt instruments, that is debt instruments other than bank loans. Debt Capital Markets are not created but rather evolve with the characteristics appropriate to