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These securities adopted the standard characteristics of a variable-rate bond. However, whereas a standard characteristic of a variable-rate bond is that it carries a fixed spread over a referral index, the spread over LIBOR on a VRN varies over time depending on the change in the perceived credit risk of the issuer. The spread is reset at each rollover date—normally every three months—by means of negotiation between the issuer and arranging house.

VRNs are usually issued with no maturity date (perpetual VRNs) but fixed five-year and longer-dated issues are in existence. VRNs generally have a put option for the existing holders of notes to sell the issue back to the lead manager of the issuing syndicate, at par, at any interest payment date.

Source Publication:
IMF, 2003, External Debt Statistics: Guide for Compilers and Users – Appendix 1. Special financial instruments and transactions: classifications, IMF, Washington DC.


Statistical Theme: Financial statistics

Created on Friday, August 29, 2003