A Euro-medium term note (EMTN) is an intermediate- to long-term generally unsecured and unsubordinated, fixed- or variable-rate interest-bearing bearer debt instrument issued in one or more Eurocurrencies in the Euromarket on a tap basis, structured under a standard documentation framework governing all issuance under the program.  EMTNs are actively issued by sovereign issuers (i.e., governments and their agencies), financial institutions and top nonfinancial multinational corporations, this being the dominant form of issuance in the Euromarket.  Because EMTNs are normally unsecured, usually only high-quality issuers can access the market.  The securities may be “plain vanilla” or structured with derivatives.  EMTNs are commonly listed, though not necessarily traded, on the London or Luxembourg Stock Exchanges.

EMTN documentation defines a continuing contractual relationship between the issuer, arranging bank, appointed dealers, issuing and paying agent, trustee and the listing agent, all of whom are selected by the issuer.  An offering circular is compiled, containing general terms and conditions, defining the parties’ roles and responsibilities, and presenting the issuer’s financial statements.  All these documents together constitute the legally binding offer, the issuer being responsible for their accuracy.  As notes are issued, only the specific terms and conditions are compiled in an individual pricing supplement, with corporate developments of the issuer being communicated in annual updates.  Whenever the borrower activates an EMTN program, the respective exchange is notified and the transaction manager updates the master documentation.

Basic EMTN Documentation
   1.   Dealer agreement
   2.   Offering circular
   3.   Fiscal agent agreement or trust deed
   4.   Paying agent agreement
   5.   Pricing supplement

A Euro medium-term note program is a standardized issuance platform for issuance of Euro-medium term notes in the public Euro markets as well as for private placements.  EMTNs are not underwritten; instead, an EMTN program is put in place by an arranging bank and marketed by dealers on a best-efforts basis.  Because they are continuously offered, EMTN programs allow issuers to tap into investor demand at virtually any time.  MTNs are usually investor-driven, with issuers offering paper to take advantage of favorable current market conditions.

Any bank with investor demand can approach the issuer with an offer and execute the transaction under the reverse enquiry provisions of the documentation.  Reverse enquiry is a securities process by which investors approach dealers with their requests for securities, such as EMTNs, which the dealers pass on to the issuer, who can issue an instrument tailored to the requirements of each investor.

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