A kind of revolving underwriting facility. Prime underwriting facilities peg the lender's yield to the bank's prime rate. Most prime underwriting facilities are short-term notes of some sort. |||The usual prime underwriting facility is a note with a maturity of anywhere from one to three years. In some cases, the lead bank will be unable to place the loan. When this happens, it will ask the underwriter of the facility to fund the balance of the credit.
A pre-approved bank, broker/dealer or other financial institution that is able to make business deals with the U.S. Federal Reserve, such as underwriting new government debt. These dealers must meet certain liquidity and quality requirements as well as provide a valuable flow of information to the Fed about the state of the worldwide markets. |||These primary dealers, which all bid for government contacts competitively, purchase the majority of Treasuries at auction and then redistribute them to their clients, creating the initial market in the process. Some of the well-known primary dealers in the United States include Merrill Lynch, Citigroup, and Lehman Brothers.
A derivative financial instrument in which the underlying asset is a debt security. Typically, these options give their holders the right to purchase or sell an underlying debt security (usually a bond) or to receive cash payment based on the current value of the underlying debt security. |||This unique type of option has been traded in the past, but is rarely traded in modern financial markets. The yield-based option is a a more commonly traded relative of the priced-based option.
Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet. The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company. |||The size of the private equity market has grown steadily since the 1970s. Private equity firms will sometimes pool funds together to take very large public companies private. Many private equity firms conduct what are known as leveraged buyouts (LBOs), where large amounts of debt are issued to fund a large purchase. Private equity firms will then try to improve the financial results and prospects of the company in the hope of reselling the company to another firm or cashing out via an IPO.
A governmental or private entity that pools mortgages and other loans. The entity will then issue pass- or pay-through securities in its own name, as a private conduit to investors. Many private conduits are now backed by mortgages, credit card receivables and other loans. |||These conduits enable banks and thrifts to more easily sell their loans to investors in the secondary market. This is because smaller lenders are not restricted by the size of the pool or limitations on eligibility. GNMA and FHLMC offered the first private conduits.
Tax-exempt bonds issued by or on behalf of local or state government for the purpose of providing special financing benefits for qualified projects. The financing is most often for projects of a private user, and the government generally does not pledge its credit. |||These bonds are used to attract private investment for projects that have some public benefit. (There are strict rules as to which projects qualify.) This type of a bond results in reduced financing costs because of the exception of federal tax.
1. The amount borrowed or the amount still owed on a loan, separate from interest. 2. The original amount invested, separate from earnings.3. The face value of a bond.4. The owner of a private company.5. The main party to a transaction, acting as either a buyer or seller for his/her own account and risk. |||Be sure to take into account the context in which this term is used, as the exact meaning of the term has many variations. Also referred to as "corpus".
A fixed-income security that guarantees a minimum return equal to the investor's initial investment (the principal amount). Also known as "principal-protected products" and "principal-protected securities." |||These investments are tailored for risk averse investors wishing to protect their investments while participating in gains from favorable market movements.
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