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Chapter 10 "Medium- to long-term debt", after you have mastered the material in this chapter, you will be able to: Identify the main types of medium- to long-term debt instruments in the market, describe the main features of these facilities, identify the financial institutions and parties involved in the provision of these facilities, undertake calculations related to the pricing of these debt instruments, discuss the availability and appropriateness of these debt instruments for business. | Chapter 10 Medium- to Long-term Debt 10- Learning Objectives Identify the main types of medium- to long-term debt instruments in the market Term loans or fully drawn advances, mortgage finance, bond markets (debentures, unsecured notes and subordinated debt) and lease financing Describe the main features of these facilities Identify the financial institutions and parties involved in the provision of these facilities Undertake calculations related to the pricing of these debt instruments Discuss the availability and appropriateness of these debt instruments for business 10- Chapter Organisation 10.1 Term Loans or Fully Drawn Advances 10.2 Mortgage Finance 10.3 Debentures, Unsecured Notes and Subordinated Debt 10.4 Calculations: Fixed-interest Securities 10.5 Leasing 10.6 Summary 10- 10.1 Term Loans or Fully Drawn Advances Term loan A loan advanced for a specific period (three to 15 years), usually for a known purpose, e.g purchasing land, premises, plant and equipment Secured by mortgage over asset purchased or other assets of the firm Fully drawn advance A term loan where the full amount is provided at the start of the loan Provided by: mainly commercial banks and finance companies to a lesser degree, investment banks, merchant banks, insurance offices and credit unions 10- 10.1 Term Loans or Fully Drawn Advances (cont.) Term loan structures Interest only during term of loan and principal repayment on maturity Amortised or credit foncier loan Periodic loan instalments consisting of interest due and reduction of principal Deferred repayment loan Loan instalments commence after a specified period related to project cash flows and the debt is amortised over the remaining term of the loan 10- 10.1 Term Loans or Fully Drawn Advances (cont.) Term loan structures (cont.) Interest may be fixed (for a specified period of time, e.g. two years) or variable Interest rate charged on term loan is based on: an indicator rate (e.g. BBSW or a bank’s own prime . | Chapter 10 Medium- to Long-term Debt 10- Learning Objectives Identify the main types of medium- to long-term debt instruments in the market Term loans or fully drawn advances, mortgage finance, bond markets (debentures, unsecured notes and subordinated debt) and lease financing Describe the main features of these facilities Identify the financial institutions and parties involved in the provision of these facilities Undertake calculations related to the pricing of these debt instruments Discuss the availability and appropriateness of these debt instruments for business 10- Chapter Organisation 10.1 Term Loans or Fully Drawn Advances 10.2 Mortgage Finance 10.3 Debentures, Unsecured Notes and Subordinated Debt 10.4 Calculations: Fixed-interest Securities 10.5 Leasing 10.6 Summary 10- 10.1 Term Loans or Fully Drawn Advances Term loan A loan advanced for a specific period (three to 15 years), usually for a known purpose, e.g purchasing land, premises, plant and equipment .
