Term:
Variable rate notes (VRNs)
Definition:
These securities adopted the standard characteristics of a variable-rate bond. However, whereas a standard characteristic of a variable-rate bond is that it carries a fixed spread over a referral index, the spread over LIBOR on a VRN varies over time depending on the change in the perceived credit risk of the issuer. The spread is reset at each rollover date—normally every three months—by means of negotiation between the issuer and arranging house.
Domain:
Finance
Source:
IMF, 2003, External Debt Statistics: Guide for Compilers and Users – Appendix 1. Special financial instruments and transactions: classifications, IMF, Washington DC