15 years: Capital markets
In the second part of Aya's video on Medium-Term Notes (MTNs), she discusses the benefits of issuing MTNs, explains the dealer's role and identifies the key buyers.
In the second part of Aya's video on Medium-Term Notes (MTNs), she discusses the benefits of issuing MTNs, explains the dealer's role and identifies the key buyers.
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8 mins 42 secs
A Medium-Term Note is a form of privately placed debt in a bond format. They are especially useful to those people wishing to raise funds quickly, such as asset managers. A MTN dealer acts as an intermediary to an investor, executes transactions and provides hedging.
Key learning objectives:
Identify why companies issue MTNs, and who buys them
Outline the role of a dealer in issuing MTNs
Identify the motivation for a company to consider an inaugural private placement
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Companies issue MTNs because it allows borrowers to complement other funding sources, such as public market funding or loans. Consider a UK-based issuer whose funding needs are predominantly in British pounds, with only 100 million Euros. As they have fewer assets in the euro area, 100 million Euro is too small for a benchmark transaction, but works well for an MTN trade.
Dealer - Typically an investment bank that arranges the transaction for the borrower and acts as an intermediary to an investor.
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