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TIDM42BI
RNS Number : 5858I
Inter-American Development Bank
09 December 2015
PRICING SUPPLEMENT
Inter-American Development Bank
Global Debt Program
Series No: 540
U.S.$5,000,000 Callable Step-Rate Notes due November 30, 2020
Issue Price: 100.00 percent
Wells Fargo Securities
The date of this Pricing Supplement is November 24, 2015.
Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions (the "Conditions") set forth in the Prospectus dated January 8, 2001 (the "Prospectus") (which for the avoidance of doubt does not constitute a prospectus for the purposes of Part VI of the United Kingdom Financial Services and Markets Act 2000 or a base prospectus for the purposes of Directive 2003/71/EC of the European Parliament and of the Council). This Pricing Supplement must be read in conjunction with the Prospectus. This document is issued to give details of an issue by the Inter-American Development Bank (the "Bank") under its Global Debt Program and to provide information supplemental to the Prospectus. Complete information in respect of the Bank and this offer of the Notes is only available on the basis of the combination of this Pricing Supplement and the Prospectus.
Terms and Conditions
The following items under this heading "Terms and Conditions" are the particular terms which relate to the issue the subject of this Pricing Supplement. These are the only terms which form part of the form of Notes for such issue.
1. Series No.: 540 2. Aggregate Principal Amount: U.S.$5,000,000 3. Issue Price: U.S.$5,000,000 which is 100.00 percent of the Aggregate Principal Amount 4. Issue Date: November 30, 2015 5. Form of Notes (Condition 1(a)): Registered only, as further provided in paragraph 8 of "Other Relevant Terms" below 6. Authorized Denomination(s) (Condition 1(b)): U.S.$100,000 and integral multiples thereof 7. Specified Currency (Condition 1(d)): United States Dollars (U.S.$) being the lawful currency of the United States of America 8. Specified Principal Payment Currency (Conditions 1(d) and 7(h)): U.S.$ 9. Specified Interest Payment Currency U.S.$ (Conditions 1(d) and 7(h)): 10. Maturity Date (Condition 6(a); Fixed November 30, 2020 Interest Rate): 11. Interest Basis (Condition 5): Fixed Interest Rate (Condition 5(I)) 12. Interest Commencement Date (Condition 5(III)): Issue Date (November 30, 2015) 13. Fixed Interest Rate (Condition 5(I)): (a) Interest Rate: From and including the Issue Date to but excluding November 30, 2018: 1.15 percent per annum From and including November 30, 2018 to but excluding November 30, 2020: 2.40 percent per annum (b) Fixed Rate Interest Payment Date(s): Quarterly in arrear on the last calendar day in February, and on the 30(th) of each May, August and November, in each year, commencing on February 29, 2016 and ending on the Maturity Date. Each Interest Payment Date is subject to the Following Business Day Convention with no adjustment to the amount of interest otherwise calculated. (c) Fixed Rate Day Count Fraction(s): 30/360 14. Relevant Financial Center: New York and London 15. Relevant Business Days: New York and London 16. Issuer's Optional Redemption (Condition 6(e)): Yes, in whole but not in part (a) Notice Period: No less than five (5) Relevant Business Days prior to the Optional Redemption Date (b) Amount: 100.00 percent per Authorized Denomination (c) Date(s): Quarterly on the last calendar day in February, and on the 30(th) of each May, August and November, in each year, commencing on November 30, 2018 to and including August 30, 2020 (d) Early Redemption Amount Bank: 100.00 percent of the Aggregate Principal Amount 17. Redemption at the Option of the Noteholders (Condition No 6(f)): 18. Governing Law: New York 19. Selling Restrictions: Under the provisions of Section (a) United States: 11(a) of the Inter-American Development Bank Act, the Notes are exempted securities within the meaning of Section 3(a)(2) of the U.S. Securities Act of 1933, as amended, and Section 3(a)(12) of the U.S. Securities Exchange Act of 1934, as amended. (b) United Kingdom: The Dealer represents and agrees that it has complied and will comply with all applicable provisions of the Financial Services and Markets Act 2000 with respect to anything done by it in relation to such Notes in, from or otherwise involving the United Kingdom. (c) Ecuador: The Dealer has acknowledged that the Notes described herein have not been and will not be offered to the public within Ecuador. The Notes are sold through a private placement. (d) General: No action has been or will be taken by the Issuer that would permit a public offering of the Notes, or possession or distribution of any offering material relating to the Notes in any jurisdiction where action for that purpose is required. Accordingly, the Dealer agrees that it will observe all applicable provisions of law in each jurisdiction in or from which it may offer or sell Notes or distribute any offering material. Other Relevant Terms 1. Listing: None 2. Details of Clearance System Approved by the Bank and the Global Agent and Clearance Depository Trust Company (DTC) and Settlement Procedures: 3. Syndicated: No 4. Commissions and Concessions: 0.30% of the Aggregate Nominal Amount 5. Estimated Total Expenses: None. The Dealer has agreed to
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pay for all material expenses related to the issuance of the Notes. 6. Codes: (a) ISIN: US45818WBJ45 (b) CUSIP: 45818WBJ4 7. Identity of Dealer: Wells Fargo Securities, LLC 8. Provisions for Registered Notes: (a) Individual Definitive Registered Notes Available on Issue Date: No (b) DTC Global Note(s): Yes, issued in accordance with the Global Agency Agreement, dated January 8, 2001, as amended, among the Bank, Citibank, N.A. as Global Agent, and the other parties thereto. (c) Other Registered Global Notes: No
General Information
Additional Information Regarding the Notes
1. The EU has adopted Council Directive 2003/48/EC on the taxation of savings income (the "Savings Directive"). The Savings Directive requires EU Member States to provide to the tax authorities of other EU Member States details of payments of interest and other similar income paid by a person established within its jurisdiction to (or secured by such a person for the benefit of) an individual resident, or to (or secured for) certain other types of entity established, in that other EU Member State, except that Austria will instead impose a withholding system for a transitional period (subject to a procedure whereby, on meeting certain conditions, the beneficial owner of the interest or other income may request that no tax be withheld) unless during such period it elects otherwise.
A number of non-EU countries and territories, including Switzerland, have adopted similar measures.
The Bank undertakes that it will ensure that it maintains a paying agent in a country which is an EU Member State that will not be obliged to withhold or deduct tax pursuant to the Savings Directive.
The Council of the European Union has adopted a Directive (the "Amending Savings Directive") which would, when implemented, amend and broaden the scope of the requirements of the Savings Directive described above, including by expanding the range of payments covered by the Savings Directive, in particular to include additional types of income payable on securities, and by expanding the circumstances in which payments must be reported or paid subject to withholding. The Amending Savings Directive requires EU Member States to adopt national legislation necessary to comply with it by January 1, 2016, which legislation must apply from January 1, 2017.
The Council of the European Union has also adopted a Directive (the "Amending Cooperation Directive") amending Council Directive 2011/16/EU on administrative cooperation in the field of taxation so as to introduce an extended automatic exchange of information regime in accordance with the Global Standard released by the OECD Council in July 2014. The Amending Cooperation Directive requires EU Member States to adopt national legislation necessary to comply with it by December 31, 2015, which legislation must apply from January 1, 2016 (January 1, 2017 in the case of Austria). The Amending Cooperation Directive is generally broader in scope than the Savings Directive, although it does not impose withholding taxes, and provides that to the extent there is overlap of scope, the Amending Cooperation Directive prevails. The European Commission has therefore published a proposal for a Council Directive repealing the Savings Directive from January 1, 2016 (January 1, 2017 in the case of Austria) (in each case subject to transitional arrangements). The proposal also provides that, if it is adopted, EU Member States will not be required to implement the Amending Savings Directive. Information reporting and exchange will however still be required under Council Directive 2011/16/EU (as amended).
2. United States Federal Income Tax Matters
The following supplements the discussion under the "Tax Matters" section of the Prospectus regarding the U.S. federal income tax treatment of the Notes, and is subject to the limitations and exceptions set forth therein. Any tax disclosure in the Prospectus or this pricing supplement is of a general nature only, is not exhaustive of all possible tax considerations and is not intended to be, and should not be construed to be, legal, business or tax advice to any particular prospective investor. Each prospective investor should consult its own tax advisor as to the particular tax consequences to it of the acquisition, ownership, and disposition of the Notes, including the effects of applicable U.S. federal, state, and local tax laws and non-U.S. tax laws and possible changes in tax laws.
Due to a change in law since the date of the Prospectus, the second paragraph of "-Payments of Interest" under the "United States Holders" section should be updated to read as follows: "Interest paid by the Bank on the Notes constitutes income from sources outside the United States and will, depending on the circumstances, be "passive" or "general" income for purposes of computing the foreign tax credit."
The Notes should not be treated as issued with original issue discount ("OID") despite the fact that the interest rate on the Notes is scheduled to step-up over the term of the Notes because Treasury regulations generally deem an issuer to exercise a call option in a manner that minimizes the yield on the debt instrument for purposes of determining whether a debt instrument is issued with OID. The yield on the Notes would be minimized if the Bank calls the Notes immediately before the increase in the interest rate on November 30, 2018, and therefore the Notes should be treated for OID purposes as fixed-rate notes that will mature prior to the step-up in interest rate for the Notes. This assumption is made solely for U.S. federal income tax purposes of determining whether the Notes are issued with OID and is not an indication of the Bank's intention to call or not to call the Notes at any time. If the Bank does not call the Notes prior to the increase in the interest rate then, solely for OID purposes, the Notes will be deemed to be reissued at their adjusted issue price on November 30, 2018. This deemed issuance should not give rise to taxable gain or loss to holders.
Under this approach the coupon on a Note will generally be taxable to a United States holder as ordinary interest income at the time it accrues or is received in accordance with the United States holder's normal method of accounting for tax purposes (regardless of whether the Bank calls the Notes).
Upon the disposition of a Note by sale, exchange or redemption (e.g., if the Bank exercises its right to call the Notes) or other disposition, a United States holder will generally recognize taxable gain or loss equal to the difference, if any, between (i) the amount realized on the disposition (other than amounts attributable to accrued but unpaid interest, which would be treated as such) and (ii) the United States holder's adjusted tax basis in the Note. A United States holder's adjusted tax basis in a Note generally will equal the cost of the Note (net of accrued interest) to the United States holder. Capital gain of individual taxpayers from the sale, exchange, redemption, retirement or other disposition of a Note held for more than one year may be eligible for reduced rates of taxation. The deductibility of a capital loss realized on the sale, exchange, redemption or other disposition of a Note is subject to significant limitations.
Information with Respect to Foreign Financial Assets. Owners of "specified foreign financial assets" with an aggregate value in excess of U.S.$50,000 (and in some circumstances, a higher threshold) may be required to file an information report with respect to such assets with their tax returns. "Specified foreign financial assets" may include financial accounts maintained by foreign financial institutions, as well as the following, but only if they are held for investment and not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-United States persons, (ii) financial instruments and contracts that have non-United States issuers or counterparties, and (iii) interests in foreign entities. Holders are urged to consult their tax advisors regarding the application of this reporting requirement to their ownership of the Notes.
Medicare Tax. A United States holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax (the "Medicare tax") on the lesser of (1) the United States holder's "net investment income" (or "undistributed net investment income" in the case of an estate or trust) for the relevant taxable year and (2) the excess of the United States holder's modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between U.S.$125,000 and U.S.$250,000, depending on the individual's circumstances). A holder's net investment income generally includes its interest income and its net gains from the disposition of Notes, unless such interest income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). United States holders that are individuals, estates or trusts are urged to consult their tax advisors regarding the applicability of the Medicare tax to their income and gains in respect of their investment in the
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