A medium-term note (MTN) is a type of debt instrument that has a maturity of between two and five years. MTNs are typically issued by corporations, governments, and other entities that need to raise short-term to medium-term debt.
MTNs are often used in securitisation transactions because they allow issuers to raise capital on a continuous basis. This is because MTNs can be issued and redeemed at any time, without the need for a full public offering.
Here are some of the applications of MTNs in the context of securitisation:
- Raising capital: MTNs can be used to raise capital for securitisation transactions. This can be helpful for issuers that are looking to finance the acquisition of assets or to fund a new business venture.
- Diversifying funding sources: MTNs can be used to diversify the issuer's funding sources. This can help to reduce the issuer's reliance on a single source of funding, such as bank loans.
- Managing cash flows: MTNs can be used to manage the issuer's cash flows. This can be helpful for issuers that have uneven cash flows, such as those that are involved in seasonal businesses.
Overall, MTNs are a versatile tool that can be used in a variety of securitisation transactions. They can help issuers to raise capital, diversify funding sources, and manage cash flows.