Reinvestment period

Warehouse Ramp-L)p Reinvestment Period Paydown Period... 

Although traditionally the Ramp-Up Periods used to be around 3-6 months from the Final Closing Date because the investors interest is to have tight Ramp-Ups periods in order to maximise diversity and returns, nowadays we are seeing much longer Ramp-Up Periods (even Ramp-Up Periods as long as the Reinvestment Periods) so that only assets of the best quality are put into the portfolio. 

After the termination of the Ramp-Up Period, the Reinvestment Period will start. This period has traditionally lasted around five years, but nowadays, we are seeing longer Reinvestment Periods. In this deal, the Reinvestment Period will last seven years from the Final Closing Date. During the Reinvestment Period, any proceeds received by the issuer upon redemption of any Collateral Debt Securities will be reinvested in further Collateral Debt Securities subject to compliance with any rating agency requirements. 

No investment may be made in Collateral Debt Securities or Eligible Investments (as described below) after the termination of the Reinvestment Period or as a result of the suspension of such Reinvestment Period due to a failure of the overcollateralisation ratio test. 

The Senior Notes shall be redeemed (in whole but not in part) by the Issuer at the direction of the holders of more than 50% of the aggregate principal amount outstanding as at the Final Closing Date of the Junior Notes. Any such redemption is subject to the following conditions (a) no such redemption may occur on any date other than an Interest Payment Date (b) other than as a result of the occurrence of certain tax events, no such redemption may occur prior to the end of the Reinvestment Period and (c) no optional redemption of the Senior Notes may occur unless there are sufficient proceeds to repay all the Senior Notes and any accrued and unpaid fees and expenses. 

We tested whether it was possible to make long term projections of chemical prices from an understanding of Hkely future reinvestment economics. Historical prices were compared with actual reinvestment economics for leader players in 10 commodity sectors in Western Europe over 20 years from 1980 - a period which contained at least two cycles. The sectors analyzed included major intermediates such as styrene and terephthalic acid, plus polyolefines and polystyrene. 

The conclusions (Fig. 16.6) were that, for many products, for example, styrene (Fig. 16.7), polystyrene, acrylonitrile, LLDPE, and PTA, the abihty of leader reinvestment economics to predict market prices was remarkably good. A difference between the two of less than USD 50 per toime on average was observed over the 20 year period, with a similar directional trend. For other products, HPDE and... 

However, while PET experienced even higher growth rates over a similar period than polypropylene, it was accompanied by a rapid fall in barriers to entry (the technology became widely available and requires relatively little capital) and in reinvestment costs for existing players. The rate at which the capital cost of new PET resin capacity has been declining (over 5 percent per year in real terms between 1982 and 1999, and even faster than that in the mid/late 1980s) is by far the highest of any of the chemical products studied - and this has tended to attract many new entrants. 

A baghouse is needed at a coal-fired power plant for a design operating period of 20 years. If the unit fails at anytime (bag meltdown), a 45% (of the initial cost) reinvestment cost will result. Two companies submit bids for this particulate control device with the following cost and operating characteristics data ... 

The source of dollar return called reinvestment income represents the interest earned from reinvesting the bond s interim cash flows (interest and/or principal payments) until the bond is removed from the investor s portfolio. With the exception of zero-coupon bonds, fixed income securities deliver coupon payments that can be reinvested. Moreover, amortizing securities (e.g., mortgage-backed and asset-backed securities) make periodic principal repayments which can also be invested. 

Capital indexation. Capital-indexed bonds have been issued in the United States, Australia, Canada, New Zealand, and the United Kingdom. Their coupon rates are specified in real terms, meaning that the coupon paid guarantees the real amount. For example, if the coupon is stated as 2 percent, what the buyer really gets is 2 percent after adjustment for inflation. Each period, this rate is applied to the inflation-adjusted principal amount to produce the coupon payment amount. At maturity, the principal repayment is the product of the bond s nominal value times the cumulative change in the index since issuance. Compared with interest-indexed bonds of similar maturity, these bonds have longer durations and lower reinvestment risk. 

The first component can be estimated by assuming a prepayment rate during the holding period the second entails assuming a reinvestment rate. For the third, two assumptions are necessary one concerning the bond s bond-equivalent yield at the end of the holding period, and another about the prepayment rate projected by the market at this point, which is a function of the projected yield. 

Ideally, an instrument s yield indicates what return an investor can achieve by holding it. Such an ideal measure would be a function of the value of the initial investment, the holding period, and the value of the matured investment. It would also take into account any reinvestment of the income received during the holding period—that is, the effect of compounding. A yield measure having these properties may be defined as follows for a simple instrument such as a Treasury bill. 

Between the short- and long-term horizon dates is one at which the net effect of the change in reinvestment rate on the bond s future value is close to zero. At this date, the bond behaves like a single-cash-flow or zero-coupon security, and its future value can be predicted with greater certainty, no matter what the yield curve does after its purchase. Defining this date as Sh interest periods after the purchase date and Ph as the value of the bond at that point, it can be shown that the bond s rate of return up to this horizon date is the value for rntn that solves equation (16.6). 

Shortly after the introduction of revenue caps, there were tendencies towards cutting costs without having in mind a sustainable balance between cost savings and increased risk. After this transient period, there is now a trend towards developing strategies for maintenance and reinvestments, where cost effectiveness is balanced with other risks. The risk consequence categories typically involve economy, safety, environmental impact, company reputation and quality of supply (Sand et al. 2007). 

A bond s yield to maturity will understate (or overstate) the realized compounded yield when the true reinvestment rate is greater than (or less than) the calculated yield to maturity. Figure A4-6 illustrates this relationship for a 10 percent coupon bond that pays 30 in interest every 6 months, has 10 years until it matures, and is originally priced to sell at par (that is, its yield to maturity is equal to the coupon rate). If the annual reinvestment rate is also 10 percent (5 percent per 6-month period), the terminal value of the cash flows received plus the interest earned from the reinvestment of those cash flows will be equal to 2,653.30 1,000 from the maturity value of the bond, 1,000 to be received in the form of coupon payments, and 653.30 from reinvesting the coupons every 6 months to earn a 5 percent, 6-month rate. Given the starting value of 1,000 and the terminal value of 2,653.30, the terminal value ratio is equal to... 

If the stated annual reinvestment rate is only 8 percent (4 percent per six-month period), the realized compounded yield on an annual basis will be equal to 9.329 percent, and if the stated annual reinvestment rate is 12 percent, the realized compounded yield will be equal to 10.713 percent. 

The provider is paid a predetermined amount for a defined set of services for a fixed period. The salient point is that the payment to a provider is not linked to his cost of inputs. If the provider incurs costs that are greater than the capitation amount, the provider takes the loss. Thus, some risk is transferred from the payer to the provider. On the other hand, if the provider s costs are lower than the capitation amount, it can usually retain and reinvest this surplus. Note that once the capitation amount is agreed upon, the provider may be tempted to reduce the cost and quality of service by cutting comers . 

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