What Is an Unsecured Note?

Medium-term notes are a unique type of corporate debt instrument. Continuous issuance to investors through the issuer's agent. Investors can choose from several maturity periods: 9 months and 1 year, 1 year and 18 months, 18 months and 2 years, and so on until 30 years. US medium-term notes are registered with the Securities and Exchange Commission in accordance with Rule 415, which provides the greatest convenience to companies that issue securities continuously and better meets the company's financing needs. Medium-term bills have a clear substitution effect on banks' medium-term loans. Once high-credit quality customers transfer and use medium-term bills for financing, commercial banks face the threat of erosion of traditional asset business profits, forcing commercial banks to undergo a profound transformation and actively adjust their customer structure and Business structure, improving risk pricing capabilities, and seeking new customers and businesses with matching risks and benefits, adapting to the rising proportion of direct financing and the shrinking relative size of loans. ^[1]

Medium-term notes

Medium-term notes are a unique type of corporate debt instrument. Continuous issuance to investors through the issuer's agent. Investors can choose from several maturity periods: 9 months and 1 year, 1 year and 18 months, 18 months and 2 years, and so on until 30 years. US medium-term notes are registered with the Securities and Exchange Commission in accordance with Rule 415, which provides the greatest convenience to companies that issue securities continuously and better meets the company's financing needs. Medium-term bills have a clear substitution effect on banks' medium-term loans. Once high-credit quality customers transfer and use medium-term bills for financing, commercial banks face the threat of erosion of traditional asset business profits, forcing commercial banks to undergo a profound transformation and actively adjust their customer structure and Business structure, improving risk pricing capabilities, and seeking new customers and businesses with matching risks and benefits, adapting to the rising proportion of direct financing and the shrinking relative size of loans. ^[1]

Medium-term notes are debt securities issued in the form of public offerings that are issued continuously within the registration period after a single registration approval by the regulatory authority. Its greatest feature is that issuers and investors can freely negotiate to determine the relevant issuance terms (such as interest rates, terms, and whether Linked to other asset prices or indices). Like corporate bonds, early medium-term notes were unsecured and unsecured pure credit securities, but the issuance of various structured financial products (including traditional asset-backed securities) also took the form of medium-term notes. The history of medium-term notes is much shorter than that of corporate bonds-more than 30 years since their appearance. However, whether in developed or emerging economies, medium-term notes are no less important than corporate bonds.

(I) Origin of medium-term notes

Early on medium-term notes and

Following launch

After many days of preparations, the first batch of 39.2 billion yuan medium-term notes

1. Medium-term notes can be used for medium and long-term liquidity, replacement of bank loans, project construction, etc .;

2. The issuance period of the medium-term notes is more than 1 year;

3. The maximum registration limit of medium-term notes is 40% of the company's net assets;

4. Medium-term notes are mainly issued by credit and accept guarantees to increase credit;

5. The issuance system is more market-oriented, and the issuance review method is a registration system. Once it is registered, it can be issued in two years;

6. The issuance pricing is more market-oriented, and the interest rate for the issuance of medium-term notes is determined.

7. Enterprises can choose to issue fixed-rate medium-term notes or floating-rate medium-term notes.

1. The principal rating of the issuing company is not restricted in principle, as long as the debt rating is recognized by the market,

1. Compared with the loan interest rate for the same period, it has a certain cost advantage;

2. One registration can be issued in installments, and the issuing method is more flexible;

3. The price issuance mechanism through direct financing can demonstrate the good credit ability of the issuing company itself.

According to the first financial report, according to the first batch of medium-term notes issued by the Ministry of Railways

At present, only commercial banks, credit cooperatives, securities companies, finance companies, etc. can purchase medium-term notes.

Medium-term notes to banks

According to the Shanghai Securities News, since the first wholesale bank's enterprises are all large-scale central SOEs with high qualifications,

Since the 1990s, the market size of medium-term notes has continued to expand. The market balance has increased from US $ 210.9 billion in 1993 to US $ 639.4 billion in 2004, an increase of 203%. The annual issuance has also increased from US $ 86.1 billion in 1993 to $ 276.4 billion in 2004, an increase of 221%; in recent years, each year

1. Distribution Agreement: The issuer and

The economic value of medium-term notes is a tailor-made design. The earliest function of medium-term notes was to make up for the term

1. Responsibilities of the issuer: Appoint main participants (underwriters, dealers, payment agents / trustees, auditors, printers, issuer lawyers); discuss issuance terms with the underwriters and lawyers; discuss with the underwriters and lawyers Appropriate issuer guarantee terms; apply to the board of directors and obtain a resolution from the board of directors to approve the issue.

2. Responsibilities of the underwriters: Negotiate with the issuer on the issue structure and method to best meet the needs of the issuer, while adapting to market practices; the process of establishing an MTN issue method; assisting in drafting the relevant agreement text; adding the opinions of the dealer In the relevant agreement; notify the issuer of relevant market information and registration procedures; be responsible for the annual data update of the debt prospectus.

3. Responsibilities of the lawyer: Responsible for the issuer and the underwriter's consultation on legal proceedings; drafting and discussing relevant agreements; notifying the issuer and the underwriter of the negotiation process; providing lawyers' opinions, drafting and reviewing relevant regulations.

4. Responsibilities of the dealer: propose amendments to the text of the agreement; provide the issuer with the latest market information and forecast of issuance opportunities; trade and sell bills; as the most important bill trader and seller, support the secondary market transactions to the greatest extent .

5. Responsibilities of the trustee: represent the interests of the holders of the bills; specify the method of payment (repayment of principal and interest) of the bills; specify the method of settlement of the bills (cash delivery and bill storage); and pay the principal and interest of the bills through DTC.

6. Auditor's duties: audit all financial information in the issuing documents; provide audit qualified opinions.

Innovation in the issuance of China's interbank bond market has accelerated significantly, especially the development of non-government credit-grade bonds represented by international development agencies' RMB bonds, short-term financing bonds, and asset-backed securities in 2005, which has enabled the Chinese bond market to support government credit only. The market for high-grade and quasi-government credit-grade bonds has begun to leap forward to a market that supports more varieties of credit-grade bonds. At the same time, the launch of new bond varieties will also play a positive role in improving the bond market ecology, and will help stimulate the rapid development of intermediary institutions such as credit ratings, thereby further improving the function of resource allocation in the bond market. At present, when the scale of non-government credit products in the Chinese bond market is still small and there is a serious lack of medium-term products, it is undoubtedly a wise choice to vigorously develop the medium-term bill market by learning from the experience of mature market countries. ^[2]