Credit Enhanced Debt Securities

Bonds or notes with special investor protection that gives them a better credit standing than the ordinary debt of the issuer would have. To obtain enhanced credit, an issuer may pay a guarantor or endorser for a letter of credit or a surety bond that lends the guarantor's higher credit to the issuer. The purpose of credit enhancement is to achieve a lower net borrowing cost.

Shelf Registration

What is "shelf" registration?

Shelf registration is the registration of securities that are not to be presently offered for sale. That is, the securities are being registered so they can be placed "on the shelf" until the time comes for issuance. Shares can be registered for the shelf for a primary distribution only if there is a reasonable expectation that the securities will be sold within two years. More liberal rules apply to shelf registration for employee benefit plans.

If an issuer registers securities for the shelf in connection with a primary distribution on the market, it is subject to two additional requirements. First, an underwriter must be used and identified in the offering materials. Second, if the shares registered for the shelf are voting stock, they must not exceed ten percent of the outstanding shares in that class of securities.

After a shelf registration becomes effective, the registrant must periodically update the registration by filing post-effective amendments or supplements. Amendments are required when information in the prospectus becomes older than sixteen months, when there is a fundamental change in the information set forth in the offering statement, and when there is any material change in the information relating to the plan of distribution. Post-effective amendments are required only during any period of time in which offers or sales are made. Thus, while an offering remains on stand-by status, amendments need not be filed.

STRUCTURED FINANCE

This usually refers to cash flow financing where there is little or no collateral involved in the loan, but there is strong historical operating cash flow to support debt repayment.

Structured finance describes any "non-standard" way of raising money. These tailor-made securities goes beyond "standard" securities like conventional loans, debentures, debt, equity. The reason to structure a more advanced security may be that conventional securities may be unattractive, unavailable or too expensive.

A service offered by many large financial institutions for companies with very unique financing needs. These financing needs usually don't match conventional financial products such as a loan. Structured finance generally involves highly complex financial transactions.