Equity Commitment Note (ECN)

What Is an Equity Commitment Note (ECN)?

An equity commitment note is a type of mandatory convertible debt issued by a bank that can be traded for stock at maturity. The note is repayable from the sale of stock by its issuer.

Basically a type of corporate debt accompanies limitations on the borrower that command how the money to repay the debt will be raised.

Understanding the Equity Commitment Note (ECN)

The equity commitment note is a form of corporate debt. It is recovered by the sale or issue of securities sometime not too far off by the bank or lending institution that issues it.

An equity commitment note varies from an equity contract note in that the investor isn't required to purchase the securities to reclaim the note. The equity commitment note can be reclaimed sometime in the future through the sale of one or the other common or preferred stock.

In the United States, the Federal Reserve Bank sets a maximum maturity of 12 years and expects that the responsible company fund one-third of the equity like clockwork.

Features

• The note can be traded for stock at maturity.
• An equity commitment note is a type of mandatory convertible bond issued by a bank or other lending institution.
• Basically, an equity commitment note is a corporate bond.