Equity Commitment Note - ECN

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DEFINITION of 'Equity Commitment Note - ECN'

A type of mandatory convertible bond issued by a bank or other lending institution that qualifies as regulated capital. An equity commitment note is redeemed when the sale or issue of securities is made at a future date by the issuing bank or lending institution. The Federal Reserve sets a maximum maturity of 12 years and requires that the issuing company fund one-third of the equity every four years.

BREAKING DOWN 'Equity Commitment Note - ECN'

Holding an equity commitment note is different than holding an equity contract note in that an investor is not required to purchase securities. The note is instead redeemed at a later time through the sale of either common or preferred stock.

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RELATED FAQS
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    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
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