A term issue is a securitization that has a fixed maturity date. This means that the investors in a term issue will receive their money back on the maturity date, regardless of the performance of the underlying assets.
A term issue is sometimes referred to as a "bullet issue".
Here are some of the applications of term issues in securitisation:
- To provide certainty: Term issues provide investors with certainty about when they will receive their money back. This can be important for investors who are looking for a predictable stream of income.
- To manage liquidity: Term issues can be used to manage liquidity. For example, an issuer may issue a term issue if it needs to raise a specific amount of money by a certain date.
- To create new products: Term issues can be used to create new securitization products that meet the needs of different investors. For example, an issuer may issue a term issue with a maturity date that matches the maturity of the underlying assets.
It is important to note that term issues are not without risk. If the underlying assets perform poorly, the investors in a term issue may not receive their full investment back on the maturity date.