As companies seek to raise capital for their business, they often turn to debt financing as a means to achieve their financial objectives. Debt financing involves borrowing money from investors and paying back the borrowed funds over a set period with interest. One of the popular ways to raise funds through debt financing is the Medium Term Note (MTN) Programme.
An MTN Programme is a flexible debt issuance tool that allows companies to issue a series of bonds, referred to as notes, to investors. These notes typically have a tenor of between one and 30 years and can be issued in multiple currencies. MTN programmes offer companies the flexibility to issue bonds on a continuous basis without having to go through the cumbersome process of filing prospectuses and seeking regulatory approvals for each issuance.
The notes issued under an MTN Programme can be either fixed rate or floating rate, with the interest rate paid to investors typically being based on a benchmark such as SONIA, ESTR or SOFR. MTNs can be issued on a public or private placement basis. Private placement issuances are generally made to institutional investors such as banks, pension funds, and insurance companies.
MTN programmes are typically used by large corporations and financial institutions that require frequent access to debt financing. The flexibility of an MTN programme enables these issuers to tap into the debt markets quickly and efficiently. MTN programmes are also used by issuers looking to diversify their investor base by issuing bonds in multiple currencies and jurisdictions.
Another reason why issuers choose an MTN programme is the potential for cost savings. Since the issuer can issue notes on a continuous basis, it can take advantage of favourable market conditions to issue bonds at lower interest rates, thereby reducing the overall cost of borrowing.
In conclusion, MTN programmes have become an attractive debt financing tool for companies seeking flexibility, cost savings, and access to a diverse investor base. The ability to issue bonds on a continuous basis without the need for regulatory approvals has made MTN programmes a popular choice for large corporations and financial institutions. As the debt markets continue to evolve, it is likely that MTN programmes will remain an important tool for companies seeking to raise capital through debt financing.
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About the author
Sabbir Rahman is Managing Director of Langdon Capital. He has held prior roles with Morgan Stanley, Lazard and Barclays Investment Bank. He has executed over £60 billion in notional value of transactions across financing, M&A and derivatives with global corporates, private equity funds and financial sponsor groups.
About Langdon Capital
With a network of 700+ alternative investors, Langdon Capital raises debt and equity capital between £1m and £25m for high-growth and innovative scale-ups with >£1m annual revenue and >30% annual revenue growth in the technology, environmental impact and renewable energy sectors, at Series A or beyond, to help fulfil growth ambitions and paths to profitability.
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