International Investment and Financing Alternatives 1. Eurocurrency deposits and loans 2. Syndicated Bank Loans 3. Eurobonds 4. Euro Medium Term Notes 5. Revolving Underwriting Facility (RUFs) 6. Eurocommercial Paper

Eurocurrency Deposits and Loans(A) 1. A eurocurrency is created when a currency is traded in a different country than the home country. 2. For example, eurodollars are traded in London. Asiadollars are traded in Hong Kong 3. Trading includes foreign exchange as well as the Money Markets. 4. The Money Markets consist of deposits and borrowings. 5. The Forward Markets for currencies are derived from the Money Markets.

Eurocurrency Deposits and Loans(B) 6. Eurodollar Deposit interest rates are higher than domestic deposit interest rates, as there are FDIC coverage. (LIBid) 7. Eurodollar Loan rates are lower than domestic loan rates as there are no reserve requirements. (LIBOR)

Syndicated Bank Loans 1. For large amounts a syndicate of banks is formed to lend long term to corporations and countries 2. Pricing is a spread over 3-month or 6-month LIBOR. For example, 6-month LIBOR %. If the 6-month LIBOR rate is 1.1%, the all-in cost would be 1.25% + 1.1% = 2.35%. 3. The loans are usually for several years, so the LIBOR is reset every three or six months 4. There is usually an upfront fee which is given to the banks in the syndicate.

Eurobonds 1. Eurobonds are denominated is a variety of currencies, dollars, euros, pounds, yen, Swiss francs and recently yuan. 2. The interest rate is usually fixed and paid semi- annually or annually using a 360-day year. 3. A ten year tenor is typical but can vary based on borrower needs and investor appetite. 4. The interest payment is tax free for European investors. 5. There is no bond rating agency in the Euromarkets, so domestic ratings are used.

Euro Medium Term Notes (EMTN) 1. Originally created for borrowers wanting fixed rate financing but needing a shorter tenor than those seen on Eurobonds 2. As expanded to even longer tenors; as much as 30 years. 3. EMT Notes are usually sold directly to investors, so only high quality borrowers can access this market

Revolving Underwriting Facility (RUF) 1. The RUF provides the borrower with the most flexibility of all financing alternatives. 2. An investment bank guarantees a fixed spread over LIBOR for the life of the facility, usually several years. 3. The issuer can issue short term notes in a variety of currencies and tenors within the umbrella of the facility. 4. The notes are sold thru the investment bank which will buy the notes if they are unable to find an investor. 5. A typical RUF program may be for a total of $1 billion, for seven years, with notes issued in 3, 6 or 12 month tenors in dollars, SF, euros or pounds.

EuroCommercial Paper 1.Like the US domestic market, only high quality borrowers can issue eurocommercial paper. 2. The Euro-CP is sold directly by the borrower to the investor. (No investment bank involved) 3. Tenors are short term, usually less than 6 months.