medium · Debt Capital Markets primary-issuance-syndication
A DCM banker advises an issuer that its new deal will likely require a 15 basis point 'new-issue concession'.
What does this term mean in practice?
- The new bond must be priced at a spread 15 bps wider than where the issuer's existing bonds trade in the secondary market to attract sufficient demand.
- The bond's coupon will be set 15 bps below the market-clearing yield, lowering the issuer's overall interest cost relative to fair value at launch.
- The secondary market price of the bond is expected to fall by roughly 15 bps shortly after it breaks syndicate and begins trading in the aftermarket.
- The issuer must remit an extra 15 bps underwriting fee to the lead managers, paid on top of the standard gross spread the syndicate already charges for the deal.
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