Eurobonds

Issued by a foreign entity and sold in a

foreign currency, other than the currency
of the country in which the issuer is
located.
 Eurobonds
INSTRUMENT INTEREST COUPON TYPE CURRENCY PAYOFF
FREQUENCY
Straight fixed-rate annual Fixed Currency of issue
Floating rate note annual or Variable Currency of issue
quarterly
Convertible bond annual Fixed Currency of issue or
convertible
Straight fixed-rate with annual Fixed Currency of issue plus
equity warrants shares
Zero-coupon bond none Zero Currency of issue
Dual-currency bond annual Fixed Dual Currency
Composite currency annual Fixed Composite currency
bond
 Comparative characteristics of bonds issues

North-America (US) Non-US Eurobond

Regulatory SEC, provincial Specialized agency Minimum regulatory control
Disclosure Detailed Variable Determined by market
practice
Issuing costs 0.75-1.25% Up to 4% 2-3%
Rating required Usually not Not required but done
required
Speed of issuance Moderate Variable Fast (bought deals)
Rrestrictions No restrictions Restrictions are No restrictions
common
Other advantages • Large market • Local • Lower interest expense
visibility
• Liquidity • Bearer bonds
• Standardized • No withholding tax
information
• Currency diversification
Other disadvantages • Disclosure is • Small Less liquidity and information
costly markets disclosure
• Reporting to tax • Low liquidity
authorities
• Reporting to
tax
authorities
 Eurobond underwriting
In general, similar to regular bond underwriting

Differences:
• Lead manager separate from selling group
• Variable price re-offering
 The Eurobond pricing paradox

Eurobonds yields are lower, but issuance

costs are higher than in North-America.