What Are InterNotes®?
The term InterNotes® refers to a product sold by Insperex, an investment banking firm. Internotes® make corporate debt securities more accessible to retail investors who want investments that align with their investment styles and promise higher yields. The firm promises clear and transparent terms, which include low initial investments, a range of maturity dates, and an offering period that allows investors to make an informed decision before committing.
- InterNotes® refers to a product offering by investment firm Insperex.
- Retail investors who purchase InterNotes® can access the corporate bond market with relative ease.
- This investment vehicle includes convenience-oriented features such as small upfront investment sizes, diverse maturity periods, and interest payment schedules.
- Issuers include names like Bank of America, John Deere, and Verizon.
- Some of the bonds are callable and there is also a survivor’s option to help with estate planning.
Insperex is an investment firm that aimed to change that. Founded as Incapital, it offers a variety of services to investors, including access to new corporate bonds issued by companies in a wide variety of sectors including the financial services, telecommunications, and automotive industries through InterNotes®.
InterNotes® come with a variety of features, including:
- Low initial investments. Smaller investors can access the corporate bond market at par or face value. Investors are able to make their purchases in $1,000 increments. There is no premium or discount pricing involved and interest is not accrued as of the date of purchase.
- Range of maturity dates. Maturities range from one to 30 years. These options give investors flexibility in laddering fixed income investments by term to meet specific investor needs. Laddering allows investors to further diversify their portfolios and boost their liquidity.
- An offering period of five days. This means investors are able to make better decisions about their investments before they commit.
Some of the names offered as InterNotes® include Bank of America, Caterpillar, Discover, Ford Credit, John Deere, Prudential, and Verizon.
Many corporate bonds can be purchased through the InterNotes® platform, which is sold through a variety of broker-dealer financial firms. The bonds sold through InterNotes® are priced without any premiums or discounts, and no accrued interest is paid at the time of purchase.
Companies sell corporate bonds in order to access capital. This extra cash allows them to complete projects or expansion plans. They often prefer issuing bonds rather than selling new shares because it doesn't dilute ownership.
Some InterNotes® are callable, meaning the issuer can redeem them before maturity. Callable bonds are often redeemed when interest rates fall. Calling forces the investor to go into the marketplace to reinvest and they may find other securities offering similar profit terms.
Insperex also offers a survivor's option. This feature allows the investor's estate to redeem the note(s) at par before it reaches the maturity date. This provision provides more flexibility in passing along wealth to heirs, although there are limitations on the bond's holding time before exercising this option. These limitations provide an incentive for investors to diversify their holdings across multiple issuers and include:
- Most bond issuers require a minimum holding period of six months
- A minimum redeemable amount of $200,000 to $250,000 per issuer
- The estate must hold the notes before the survivor can take possession
InterNotes® carry the same type of market risk as any other corporate bond. As such, they are not often readily sold on secondary market and tend to fall in price as interest rates rise. They are also subject to credit risk in the event that an issuer defaults on its debt obligations.
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