Define: Coupon Notes

Coupon notes are a financial instrument that combines the features of a bond and a coupon. It is a type of debt security that pays periodic interest payments, known as coupons, to the holder. The coupons are typically fixed-rate and are paid at regular intervals, such as annually or semi-annually. The principal amount of the coupon notes is repaid to the holder at maturity. Coupon notes are often issued by corporations or governments to raise capital and are traded in the financial markets. The terms and conditions of coupon notes are outlined in a legal document, such as a prospectus or offering memorandum, which provides details on the interest rate, maturity date, and other relevant information.

Coupon notes refer to financial instruments issued by companies or governments that entitle the holder to periodic interest payments, known as coupons, over the life of the note. These notes are a type of debt security or bond where the issuer agrees to pay interest to the holder at specified intervals until the maturity date of the note, when the principal amount is repaid.

Some key features of coupon notes are:

• Interest Payments: Coupon notes pay periodic interest payments to the holder based on a fixed or variable interest rate determined at issuance. The interest rate, coupon amount, and payment frequency are specified in the terms of the note.
• Maturity Date: Coupon notes have a defined maturity date, which is the date when the issuer repays the principal amount to the holder. Until the maturity date, the holder receives regular interest payments.
• Issuance and Trading: Coupon notes are typically issued by corporations or governments to raise capital. They can be bought and sold in financial markets, allowing investors to trade these securities based on prevailing interest rates and market conditions.
• Credit Risk: Investors assess the creditworthiness of the issuer before purchasing coupon notes, as they are subject to credit risk—the risk of the issuer defaulting on interest payments or failing to repay the principal amount at maturity.

Coupon notes are popular investment instruments for income-oriented investors seeking regular interest payments and a fixed maturity date. They provide issuers with a means to raise funds for financing operations, investments, or projects while offering investors a predictable stream of income and return on capital. The terms and conditions of coupon notes are outlined in the offering documents, including the interest rate, payment schedule, maturity date, and any special features or provisions associated with the notes.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 28th April 2024.