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 / narasimha rao
boss, i was asking abt external commercial borrowings....
| Is This Answer Correct ? | 30 Yes | 13 No |
Answer / 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 |
Answer / jhulu
the above answer of FCCB is right...
but the term external commercial borrowings refers to the
total debt that a sovereign entity has borrowed outside the
country in commercial terms
| Is This Answer Correct ? | 19 Yes | 12 No |
Answer / a
FCCB's are to be repaid out of the internal accurals of the
company or buy raising a loan. Since libor is at low levels
many companies are raising ECB at L+350 bps which works out
to be 500 bps, which is much cheaper than INR term loans @
11%. Also if the company has exports, it acts as a natural
hedge thereby saving the hedging cost.
| Is This Answer Correct ? | 6 Yes | 3 No |
Answer / biju ramakrishnapillai
External Commercial Borrowings is a wider term, and it includes Foreign Currency Convertible Bonds before conversion into equity.
ECB is borrowings and when FCCB is converted into shares, it changes the form - from Debt into Equity- and it is no more ECB.
Hope this helps.
| Is This Answer Correct ? | 2 Yes | 1 No |
Answer / prakash
ECB: External Commercial Borrowing need not be only
borrowings from outside the country.
it could be domestic finacial institutions/banks etc.,
also someone in one of the answers above "sovereign entity"
what he probably mean't is a 'Corporate entity'.
Sovereign would mean a country or government representing a
country. A company is not sovereign. it is controlled by
the laws of the land in which it is established. it does
not make its own laws and legislations but has to follow
those formulated by the country it is established in. A
LEGAL ENTITY yes....not sovereign
| Is This Answer Correct ? | 4 Yes | 6 No |
Answer / ed
Why would a company raise cash through ECBs to buy back
previously issued FCCBs which are selling at a discount?
| Is This Answer Correct ? | 1 Yes | 4 No |
Answer / aseem kapoor
We should not be looking to find differences between the two, FCCB are an instrument under ECB.The definition for FCCB given in 1st answer is correct so dont want to confuse you.
Also they are means of external borrowing (not domestic) the borrowing may be arranged by a domestic bank but the debt is external.It has an automatic route or approval route for the money to come in, think of them as red channel or green channel while exiting from customs at airport.
| Is This Answer Correct ? | 1 Yes | 4 No |
Answer / nil
ECBs and FCCBs are same things. Explanation of FCCB given in
answer 1 above is correct.
| Is This Answer Correct ? | 3 Yes | 28 No |
Answer / raghuamam
ECBs it means europian central bank. it was established in
the year 1998. it is one of the importent central bank.it
is responcible for the the monetory policy of the 15 member
countries of the eurozone.
FCCBs it means foreign currency convertable bonds. it means
company issue the bonds in the foreig currency. it is the
mix of both equity and debt. the bond holder have the right
to get regular coupan and principal amount and also holder
have the right to convert their bonds in to equity, this
right belongs to the bond holder.
| Is This Answer Correct ? | 7 Yes | 144 No |
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