Equity Commitment Note - ECN

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.

RELATED TERMS
  1. Mandatory Redemption Schedule

    Specified dates when a bond issuer is required to redeem all ...
  2. Bond Anticipation Note - BAN

    A short-term interest-bearing security issued in advance of a ...
  3. Deferred Equity

    A type of security, such as preferred shares or convertible bonds, ...
  4. Bond for Bond Lending

    A lending structure used in the Federal Reserve's security lending ...
  5. Issue

    1. The process of offering securities as an attempt to raise ...
  6. Committed Facility

    A credit facility whereby terms and conditions are clearly defined ...
Related Articles
  1. Personal Finance

    The Banking System: Commercial Banking - How Banks Make Money

    ByStephen D. Simpson, CFA As mentioned before, banks basically make money by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on ...
  2. Investing

    Why Include Convertible Securities in Your Portfolio

    What are convertible securities and why you should include them in your portfolio.
  3. Mutual Funds & ETFs

    Securities Lending: Cause Of The Next Financial Crisis?

    Securities lending can pose risks to investor's portfolios and the entire financial system.
  4. Term

    How Equity Capital Markets Work

    An equity capital market is a market existing between companies and financial institutions that raises money for the companies.
  5. Financial Advisors

    Worried About Stocks? Try on Convertibles

    Convertibles are a good hedge against equity market risk (if you're o.k. with losing a bit of upside potential).
  6. Personal Finance

    The Banking System: Commercial Banking - Business Lending

    ByStephen D. Simpson, CFA Commercial lending - lending to businesses - is really a two-tier market in the United States. At the level of large corporations, bank lending is not as significant ...
  7. Credit & Loans

    What Goldman Sachs’s Online Lending Means For Banking

    Recently Goldman Sachs has announced its entry into the online lending space. Most commonly known as an investment bank, Goldman’s newest venture may provide insight into the future of online ...
  8. Investing

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
  9. Bonds & Fixed Income

    Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
  10. Stock Analysis

    Prefer Dividends? Why Not Look At Preferred Stock?

    Preferred stock is an under-used option for income-seeking investors.
RELATED FAQS
  1. Why would a corporation issue convertible bonds?

    Discover how corporations issue convertible bonds to take advantage of much lower interest rates as a result of a conversion ... Read Answer >>
  2. What is the difference between convertible and reverse convertible bonds?

    The difference between a regular convertible bond and a reverse convertible bond is the options attached to the bond. While ... Read Answer >>
  3. How do I use a premium put convertible?

    Holders of convertible bonds face all the pitfalls that traditional bondholders face - liquidity risk, interest rate risk ... Read Answer >>
  4. What forms of debt security are available for the average investor?

    Discover the various different types of debt securities, issued by government entities or corporations, that are available ... Read Answer >>
  5. What is the difference between a bank guarantee and a bond?

    Understand what a bank guarantee is and what a bond is, and which one is a debt instrument. Learn the differences between ... Read Answer >>
  6. What securities does the primary market deal with?

    Find out what kinds of securities are traded on the primary market, including who can participate in trading and the basics ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center