Euro Medium Term Note

A Euro Medium Term Note (EMTN) is a debt security issued under a medium-term note programme that allows an issuer to raise funds through multiple note issuances, typically across international capital markets.

Despite its name, an EMTN is not necessarily denominated in euros or issued in Europe. The term generally refers to the structure and international nature of the issuance programme.

A simplified representation is:

$\text{EMTN Programme}\to \text{Multiple Note Issues}\to \text{International Debt Financing}$

EMTN programmes

An EMTN programme provides an established framework under which an issuer can issue notes on multiple occasions.

The programme documentation generally establishes the principal legal, financial, and administrative terms applicable to future issuances.

A simplified issuance structure is:

$\text{Issuer}\to \text{EMTN Programme}\to \text{Individual Note Issues}\to \text{Investors}$

Individual notes issued under the programme can differ in terms such as maturity, currency, interest rate, principal amount, and other conditions.

Issuers

EMTN programmes can be established by a variety of issuers, including:

• sovereign governments;
• government-related entities;
• financial institutions;
• corporations;
• supranational institutions.

An issuer can use an EMTN programme as part of its broader debt-management or funding strategy.

A simplified relationship is:

$\text{Issuer Funding Requirement}\to \text{EMTN Programme}\to \text{Debt Issuance}\to \text{Investor Funding}$

Currencies

EMTN notes can be issued in multiple currencies.

Possible currencies include:

• euro;
• U.S. dollar;
• pound sterling;
• Japanese yen;
• Swiss franc;
• other currencies permitted under the programme.

Consequently, the word "Euro" in Euro Medium Term Note does not mean that the note must be denominated in euros.

A simplified representation is:

$\text{EMTN Programme}\to \text{Multi-Currency Debt Issuance}$

Maturity

EMTN programmes are generally used for medium-term debt issuance, although the maturity of individual notes can vary according to the programme and applicable market conventions.

The maturity determines the period until the principal amount becomes due for repayment.

A simplified relationship is:

$\text{Issue Date}\to \text{Maturity Date}\to \text{Principal Repayment}$

Interest and returns

EMTN notes can have different interest structures.

They may include:

• fixed-rate notes;
• floating-rate notes;
• zero-coupon notes;
• index-linked notes;
• other structured interest arrangements.

For a fixed-rate note, a simplified interest calculation is:

$\text{Interest Payment}=\text{Principal}\times \text{Coupon Rate}$

Actual payment calculations depend on the terms of the individual note, including the applicable day-count convention and payment schedule.

Issuance methods

Notes under an EMTN programme can be issued through different mechanisms, including transactions arranged with investment banks or other financial institutions.

Issuances can be structured to meet the funding requirements of the issuer and the investment requirements of investors.

A simplified process is:

$\mathrm{F}\mathrm{u}\mathrm{n}\mathrm{d}\mathrm{i}\mathrm{n}\mathrm{g}\mathrm{R}\mathrm{e}\mathrm{q}\mathrm{u}\mathrm{i}\mathrm{r}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{n}\mathrm{t}\to \mathrm{P}\mathrm{r}\mathrm{i}\mathrm{c}\mathrm{i}\mathrm{n}\mathrm{g}\to \mathrm{N}\mathrm{o}\mathrm{t}\mathrm{e}\mathrm{I}\mathrm{s}\mathrm{s}\mathrm{u}\mathrm{a}\mathrm{n}\mathrm{c}\mathrm{e}\to \mathrm{I}\mathrm{n}\mathrm{v}\mathrm{e}\mathrm{s}\mathrm{t}\mathrm{o}\mathrm{r}\mathrm{S}\mathrm{u}\mathrm{b}\mathrm{s}\mathrm{c}\mathrm{r}\mathrm{i}\mathrm{p}\mathrm{t}\mathrm{i}\mathrm{o}\mathrm{n}$

Individual issues can be publicly offered or privately placed, depending on the applicable legal and regulatory framework.

Advantages

An EMTN programme can provide issuers with flexibility in accessing debt markets.

Potential advantages include:

• repeated access to capital markets;
• flexibility in currency selection;
• flexibility in maturity;
• standardized programme documentation;
• ability to respond to market conditions;
• access to a broad international investor base.

A simplified relationship is:

$\mathrm{E}\mathrm{s}\mathrm{t}\mathrm{a}\mathrm{b}\mathrm{l}\mathrm{i}\mathrm{s}\mathrm{h}\mathrm{e}\mathrm{d}\mathrm{P}\mathrm{r}\mathrm{o}\mathrm{g}\mathrm{r}\mathrm{a}\mathrm{m}\mathrm{m}\mathrm{e}\to \mathrm{F}\mathrm{l}\mathrm{e}\mathrm{x}\mathrm{i}\mathrm{b}\mathrm{l}\mathrm{e}\mathrm{I}\mathrm{s}\mathrm{s}\mathrm{u}\mathrm{a}\mathrm{n}\mathrm{c}\mathrm{e}\to \mathrm{E}\mathrm{f}\mathrm{f}\mathrm{i}\mathrm{c}\mathrm{i}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{A}\mathrm{c}\mathrm{c}\mathrm{e}\mathrm{s}\mathrm{s}\mathrm{t}\mathrm{o}\mathrm{F}\mathrm{u}\mathrm{n}\mathrm{d}\mathrm{i}\mathrm{n}\mathrm{g}$

Risks

Investors in EMTN notes can be exposed to several forms of risk.

These can include:

• Credit risk;
• Interest rate risk;
• Liquidity risk;
• Foreign exchange risk;
• market risk;
• reinvestment risk.

For a note denominated in a foreign currency, an investor whose reference currency differs from the note's currency can additionally face foreign-exchange risk.

A simplified representation is:

$\text{EMTN Investment}\to \text{Credit}+\text{Market}+\text{Liquidity}+\text{Currency Risk}$

The actual risks depend on the terms and structure of the individual note.

EMTN and medium-term note programmes

An EMTN programme is a type of medium-term note programme designed for repeated debt issuance.

The programme should be distinguished from an individual note issued under it.

A simplified relationship is:

$\text{EMTN Programme}\ne \text{Individual EMTN}$

The programme establishes the framework, while each individual issuance creates a separate debt security with its own terms.

See also

• Medium-term note
• Bond
• Debt security
• Eurobond
• Capital market
• Corporate bond
• Sovereign bond
• Debt issuance
• Fixed-income security