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Chapter 12
Chapter 12 Outline
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Belgian
Corporation
Securitization
Deposits
funds Belgian
Bank
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Eurocurrency loans
– Loans are made on a floating-rate basis, typically set at a fixed margin
above LIBOR.
– The bank’s spread is based on the borrower’s perceived riskiness and
can range from 15 to 300 basis points.
– Maturity ranges from 3 to 10 years.
– If a loan is made by a syndicate of banks, a syndication fee of 0.25% to
2% of the loan value is charged.
– The drawdown period and repayment period vary by the borrower’s
needs.
– Borrowers are mainly concerned about the effective interest rate (all-in
cost) on their loans.
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– Multicurrency clauses – the borrower has the right to switch from one
currency to another on any rollover or reset date, enabling the borrower
to match currencies on cash inflows and outflows based on expected
exchange rate changes.
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