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.

  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Equity Linked Note - ELN

    An instrument whose return is determined by the performance of ...
  3. Issuer

    A legal entity that develops, registers and sells securities ...
  4. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  5. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
  6. Common Stock

    A security that represents ownership in a corporation. Holders ...
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  3. Why would a corporation issue convertible bonds?

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