medium · Debt Capital Markets bond-instruments-structures
What is an 'Original Issue Discount' (OID) in the context of syndicating a bridge or Term Loan B?
- Selling the debt to investors at a price below par (e.g., 98.00) to increase their effective yield without changing the nominal coupon.
- The numerical difference between the prevailing high-yield credit spread and the comparable investment-grade spread for that issuer.
- A pricing discount the lenders grant to the issuer in exchange for repaying the entire loan before its first scheduled anniversary date.
- A fee that the underwriting bank pays directly over to the issuer in exchange for the exclusive right to underwrite and then syndicate the new deal.
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