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what is the major difference between ECBs and FCCBs.
how is the accounting treatment done to them as to mitigate
the forex fluctuation?
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Answer Posted / ravi shankar s
ECB: External Commercial Borrowing
FCCB: Foreign Currency convertable bond.
ECB is a broad term and includes all foreign currency
borrowings that are due and is repayable in the currency in
which it was borrowed. They usually consitute short term
loan that is usually borrowed at Libor (London Interbank
rate) + premumu/Spread. This can be anywhere between 200 to
500 basis points depending on the corporates standing in
the market.
FCCB on the other hand is a bond and usually for a long
tenor. When corporates see an opportunity to buy back bonds
issued by them at a discount to the face value and also the
book value recorded by the corporate it engages in a
treasury operation of buying back its own bond. This
capital which it requires to buyback its capital is either
internally accrued or borrowed again through ECBs.
Regards,
Ravi
| Is This Answer Correct ? | 21 Yes | 8 No |
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