Credit Linked Note
A Credit Linked Note (CLN) is a special form of bond where the repayment amount is not solely dependent on regular interest payments, but on specific events that are contractually agreed upon in advance. These events could include the credit risk of an underlying loan or a reference debt. CLNs are categorized as structured securities and offer an innovative way to hedge credit risks through bonds while allowing investors to participate in the earnings of the reference debt.
The issuer of a CLN can use this type of bond to partially or fully hedge their credit risk. When the specified event occurs, it can influence the repayment amount of the bond. For instance, if a defined credit event, such as a payment default by a specific borrower, is included in the CLN and it actually happens, it could lead to a modification in the bond's repayment amount.
CLNs are often issued by Special Purpose Vehicles (SPV), which are specially created companies for a specific purpose and are separated from the assets of the lending institution. This separation provides additional security for investors, as only the value of the underlying credit portfolio is at risk and not the issuer's financial risk.
Typically, a CLN may have a fixed interest rate in the form of a coupon. However, it can also include a variable component that depends on the performance of the underlying credit portfolio. This means that the repayment amount of the bond can vary based on the development of the reference debt.
At Crowd4Cash, investors have the opportunity to invest in various financial products, including Credit Linked Notes. These innovative financial instruments allow investors to participate in diversified credit portfolios and potentially benefit from attractive returns. Detailed information about Crowd4Cash's investment products and their risk profiles can be found on our website.
Through careful selection of credit portfolios and close collaboration with top-notch financial experts, Crowd4Cash aims to be a trusted partner for investors. Transparent presentation of opportunities and risks enables investors to make informed decisions and tailor their portfolio according to their individual investment goals.