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What are Minibonds?
Minibonds are very much like Bonds, except it caused the collapsed of the world's financial markets and the collapsed of Lehman Brother's in September 2008.
So what is a Minibond? It is the underlying securities which usually consists of a portfolio credit-linked notes (often termed “synthetic collateralised debt obligation securities” or CDOs) that have the following characteristics:
- USD-denominated principal amount equivalent to the total principal amount of the of Notes issued, which will be determined on or around the fixing date;
- Coupon rate of 3-month USD LIBOR plus a margin, to be determined by the Notes arranger on the fixing date.
- Interest that is payable quarterly on a day that is no later than the corresponding payment date of the Notes.
- Are rated AA or Aa2 by any one of the Rating Agencies: Standard & Poor's, Moody's and/or Fitch.
- Not be subject to any negative Credit Watch of Standard & Poor's or review for possible downgrade on Moody's Watchlist or not be subject to Fitch Rating Watch Negative.
- Be acceptable to the Swap Counterparty as a lending source for the obligations of the Issuer under the swap arrangements.
- Mature on or before the maturity date of the Notes.
In determining the rating of the Underlying Securities, the Rating Agency will perform detailed due diligence on the structure of the Underlying Securities and the Portfolio (as defined below). The underlying securities expected to be secured by a note, a fund or cash, in a principal amount equivalent to the total principal amount of the Notes issued.
The Underlying Securities will reference a static pool of entities/obligations (the “Portfolio”) and redemption at maturity is dependant upon the credit performance of the portfolio. The Underlying Securities will be exposed to the credit risk of the portfolio and follow credit event definitions similar to those outlined in this Pricing Statement for determination of when losses occur: such as bankruptcy, failure to pay and restructuring. The level of credit enhancement provided against loss on the portfolio of the Underlying Securities is expected to represent a minimum of 105% of that required by the applicable rating agency for the assignment of a “AA” or “Aa2” rating, as the case may be.
When an entity in the portfolio experiences a credit event, a determination will be made if the market value of one of the entity's debt obligations has fallen below its principal amount (i.e. less than 100 per cent.). If it has fallen, then a loss amount for the portfolio is calculated based on the fall in market value below 100 per cent. and the weighting of that entity in the portfolio.
Minibonds are very much like Bonds, except it caused the collapsed of the world's financial markets and the collapsed of Lehman Brother's in September 2008.
So what is a Minibond? It is the underlying securities which usually consists of a portfolio credit-linked notes (often termed “synthetic collateralised debt obligation securities” or CDOs) that have the following characteristics:
- USD-denominated principal amount equivalent to the total principal amount of the of Notes issued, which will be determined on or around the fixing date;
- Coupon rate of 3-month USD LIBOR plus a margin, to be determined by the Notes arranger on the fixing date.
- Interest that is payable quarterly on a day that is no later than the corresponding payment date of the Notes.
- Are rated AA or Aa2 by any one of the Rating Agencies: Standard & Poor's, Moody's and/or Fitch.
- Not be subject to any negative Credit Watch of Standard & Poor's or review for possible downgrade on Moody's Watchlist or not be subject to Fitch Rating Watch Negative.
- Be acceptable to the Swap Counterparty as a lending source for the obligations of the Issuer under the swap arrangements.
- Mature on or before the maturity date of the Notes.
In determining the rating of the Underlying Securities, the Rating Agency will perform detailed due diligence on the structure of the Underlying Securities and the Portfolio (as defined below). The underlying securities expected to be secured by a note, a fund or cash, in a principal amount equivalent to the total principal amount of the Notes issued.
The Underlying Securities will reference a static pool of entities/obligations (the “Portfolio”) and redemption at maturity is dependant upon the credit performance of the portfolio. The Underlying Securities will be exposed to the credit risk of the portfolio and follow credit event definitions similar to those outlined in this Pricing Statement for determination of when losses occur: such as bankruptcy, failure to pay and restructuring. The level of credit enhancement provided against loss on the portfolio of the Underlying Securities is expected to represent a minimum of 105% of that required by the applicable rating agency for the assignment of a “AA” or “Aa2” rating, as the case may be.
When an entity in the portfolio experiences a credit event, a determination will be made if the market value of one of the entity's debt obligations has fallen below its principal amount (i.e. less than 100 per cent.). If it has fallen, then a loss amount for the portfolio is calculated based on the fall in market value below 100 per cent. and the weighting of that entity in the portfolio.