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What are Euronotes?

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A Euronote is an underwritten, fully negotiable, unsecured, unsubordinated promissory note of a high-quality corporate, financial or sovereign borrower, issued in the Euromarket in bearer form, typically at a discount with a maturity of 7 to 365 days (normally of one, three or six months).  As with CP, Euronotes are chiefly used to fund foreign currency denominated working capital requirements.  The most active sector of the Euronote market is denominated in USD.  “Euronote” is often used as a generic term for any short-term Euroissue, including Euro certificates of deposit (ECD) or Euro commercial paper (ECP).

By means of a note issuance facility (NIF), a syndicate of banks guarantees to the issuer of a Euronote the availability of funding over a designated future time period, by undertaking to purchase any unsold notes at the contractually agreed rate if the notes are not successfully placed in the market or by providing “book credits” (i.e., a backup or standby credit facility) at each rollover date.  The NIF developed as an alternative to the syndicated credits market in the 1980s, but has since been replaced by euro commercial paper (ECP) and euro medium-term notes (EMTNs).

Note Issuance Facility Examples
• Revolving underwriting facility
• Transferable revolving underwriting facility
• Grantor underwriting note

A NIF relies on a tender panel (TP), which is a syndicate of commercial and investment banks that commits to buying any unsold Euronotes at previously set rates or providing funds to the borrower through a standby credit facility.  A tender-panel agent is the bank, usually the arranger of the note issuance facility, responsible for the collection of competitive bids requested from the tender-panel members and the allocation of paper to the most competitive bidders.

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