Corporate Trust and Loan Agency

Bonds
A bond is a long-term debt security issued by corporations and governments offering fixed interest payments periodically for a period of more than one year. An investor who buys a bond is lending money to the issuer, to help finance current operations and new acquisitions of property, plant or equipment.

Medium-term notes (MTNs)
An MTN is a corporate debt instrument that is continuously offered over a period of time by an agent of the issuer. Investors can select from maturity bands of 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, up to 30 years.

Certificates of deposit (CDs)
A CD is a certificate issued by a bank that shows that a specific amount of money has been deposited at the issuing institution. CDs are issued by banks to access funds for their finance and lending activities. The CD bears a specific maturity date, interest rate and denomination.

Commercial papers (CPs)
CPs are short-term promissory notes. The maturity of most CPs is less than 270 days, with the most common maturities ranging from 30 to 50 days or fewer.

Convertible/Exchangeable bonds
These are bonds that may be exchanged for the common stock of the same company. If the bondholder wishes to convert the bond, it must be done according to the terms of the conversion notice.

Euro/Yankee/Global bonds (144A/Reg S)
This type of bond is denominated in a specific country's currency and sold to investors outside of that country whose currency it is issued.

Floating rate notes
This is a class of securities having an interest rate that is not fixed, but typically has a margin above a market index.

Private placements
A private placement is a direct offering of securities to a limited number of sophisticated institutional investors. Investors in privately placed securities include insurance companies, pension funds, mezzanine funds, equity funds and trusts.

Asset-backed securities (ABS)
These are bonds or notes backed by pools of financial assets, typically with predictable income flows, originated by banks and other credit providers. Examples of such assets include credit card receivables, trade receivables and auto loans.

Asset-backed commercial paper (ABCP) programmes
A CP whose principal and interest payments are designed to be derived from cash flows from an underlying pool of assets. As the assets are generally of a longer tenor than the CP issued to fund it, if the CP cannot be reissued to repay a maturing CP, a backstop liquidity facility is drawn upon to provide cash to repay investors.

Commercial mortgage-backed securities (CMBS)
These are securities that are backed by one or more pools of mortgage loans. CMBS are backed by one or more loans secured by commercial properties, which may include multifamily housing complexes, shopping centres, industrial parks, office buildings and hotels.

Equity-linked notes (ELNs)
ELN is an instrument whose return is determined by the equity markets (by the performance of a single equity security, a basket of equity securities or an equity index, in which case it is called equity-index-linked note).

Limited recourse notes
In the event of a default, the lender only has recourse to the asset(s) that are being put forward as a security for the loan, and not to any other assets the borrower or its parent company may have.

Mortgaged-backed securities (MBS)
MBS includes all securities whose security for repayment consists of a mortgage loan or a pool of mortgage loans secured on property. Investors receive payments of interest and principal that are derived from payments received on the underlying mortgage bonds.

Repackaged note programme (RPN)
Repackaging involves a change of profile of something that is already a debt security.

Residential mortgage-backed securities (RMBS)
These are securities that involve the issuance of debt that is secured by a pool of mortgage loans that have a lien over residential properties.

Project finance
Project finance is a form of financing projects, primarily based on claims against the financed asset or project rather than on the sponsor of the project. However, there are varying degrees of recourse possible. Repayment is based on the future cash flows of the project.

Non-recourse finance
Lenders are repaid from the cash flows of the project and not from the other cash flows of the parent company/sponsor. If the project fails, they do not have recourse to any other assets of the parent company.

Limited recourse financing
Lenders have limited recourse to the other assets of the parent company. This is specified at the time of funds being borrowed.

Sukuk
These are trust certificates that represent an undivided pro-rata ownership of an underlying asset. The certificates are freely tradable. Sukuk holders, as undivided pro-rata owners of underlying leased assets, jointly assume the incidents of ownership and are thereby entitled to jointly share the income generated through the use of the underlying asset. Sometimes, these are described as the Islamic bond.

Murabaha
This is ‘cost-plus’ financing popular for providing trade financing. It involves the sale of a commodity or goods at a price that includes cost plus a stated profit known to both the vendor and the purchaser. The price is usually paid back by the buyer in deferred payments.

Calculation agent/Agent bank
The calculation agent/agent bank calculates the rate of interest for floating and variable rate notes with reference to prescribed indices. Calculates the redemption price on the bond (and sometimes the price on the coupon) according to a prescribed formula and notifies all the relevant parties.

Common depositary
Appointed by the International Central Securities Depositaries (ICSDs), Euroclear Bank and Clearstream Banking to hold global securities on behalf of the ICSDs. Supports the processing of payments between issuers and investors, and supports the processing and communication of corporate actions between agents and the ICSDs.

Conversion agent
Coordinates the conversion from bonds/notes into the issuer's equity. Coordinates with the transfer agent (or depositary for American depository receipt transactions) for the delivery of converted equity to the note holders.

Depository
Holds global securities on behalf of the Depository Trust and Clearing Corporation (DTCC).

Fiscal agent/Principal paying agent
Appointed for stand-alone bond/note issues. The agent’s main responsibility is to process payments of principal and interest from the issuer to the investors, usually through the international clearing systems since the majority of issues are held in global note form.

Issuing and paying agent
Appointed in respect of various forms of debt securities, particularly securities of continuous issuance programmes such as medium-term notes.

Registrar and transfer agent
Maintains the register of note holders for securities issued in registered form and records transfer of ownership. Administers the transfer of ownership between the note holders.

Specialised depositary
Appointed by Euroclear to hold definitive notes on their behalf. Supports the processing of payments between issuers and investors, as well as the processing of corporate actions.

Account bank
Provides bank accounts in currencies required for any transaction with access made available to selected deal parties via HSBCnet.

Calculation agent
Calculates the redemption price on a bond (and sometimes the price on the coupon) according to a prescribed formula and notifies the relevant parties.

Cash manager
Administers the payment waterfall outlined in the documentation and manages the cash flows of the transaction.

Common depositary
Appointed by the ICSDs, Euroclear Bank and Clearstream Banking to hold global securities on behalf of the ICSDs. Supports the processing of payments between issuers and investors as well as the processing and communication of corporate actions between agents and the ICSDs.

Depository
Holds global securities on behalf of the DTCC.

Escrow agent
Acts as an independent party to safekeep and administer certain assets pending completion of particular contractual obligations.

Fiscal agent/Principal paying agent
Processes payments of principal and interest from the issuer to the investors, usually through the clearing systems since the majority of issues are held in global note form.

Note trustee
Represents the interests of note holders of issues of securities.

Registrar and transfer agent
Maintains the register of note holders for securities issued in registered form and records transfer of ownership, and administers the transfer of ownership between the note holders.

Security trustee
Holds charge over security for the benefit of the various secured parties.

Account bank
Provides bank accounts in currencies required for any transaction with access made available to selected deal parties via HSBCnet.

Facility agent
Administers and services syndicated loan facilities. Simultaneously serves as a mediator between the debtor and the group of lenders, in accordance with the requests of the group of lenders and the debtor as stipulated within the agreement. The facility agent will coordinate the loan withdrawals, calculate, collect and distribute fees, interests, penalties and principal instalments and submit creditors/lenders requests to the debtor and vice versa, to represent lenders in assigning/granting an order to the security agent regarding cases related to the collateral.

Security trustee/agent
Holds charges over security for the benefit of the various secured parties.

Investment agent
The role of investment agent is appointed by the participants (lenders) to act on their behalf for Murabaha transactions in as much the same way as what the facility agent does under a non-Shariah compliant transaction. Other than the normal facility agent functions, for each Murabaha transaction, at the request of the borrower (purchaser), the investment agent shall purchase a pre-defined commodity (usually a base metal) from a commodity broker and then immediately sell the same commodity to the borrower (purchaser) on a deferred payment basis at a deferred sale price (purchase price plus profit). The borrower (purchaser) will use the profit element of the commodity transaction to meet its obligations to pay a return to the participants under the Murabaha facility.