Variable drawable bond issue need accrued interest to pay for installment repayment portion only

[lisa_savinovich]

Dear Treasury Friends,

We have a variable interest rate drawable bond issue (product category 42/product type 42N) for $75M. The full life of the bond is 29.5 years and the first installment repayment ($1.5M) is due 3.5 years after issuance with various repayment amounts occurring annually from then on.  We are using reference interest rates.  The interest rate can change every days and is typically due once a month: interest calculation method is Act/ActY (ISDA) term of 7 and unit of time 1 day. Interest payments up to the date of the first installment repayment are correct, the one item that is not yet working correctly is the accrued interest related to the installment repayment. At the installment repayment date, accrued interest for just the installment repayment amount is due with the payment: i.e. interest is due on 8/15/20XX for a total of 12 days on $1.5M at a rate of 0.01%. The remainder of the interest for that month is due on the first working day of the new month: i.e. interest is due on 9/1/20XX for a total of 29 days on $73.5M at a rate of 0.01%. What is the configuration need to have only the interest related to the installment repayment amount pay with the installment repayment on 8/15/20XX and the remainder on 9/1/20XX?

Thank you in advance for your assistance in this matter.

Lisa

[alex_zhu2]

Hi Lisa,

You can configure this at the path:

Transaction Manager -> Securities -> Master data -> Product Types -> Condition Types -> Assign Condition Types to Condition Groups

At here, select the related condition for your product type 42N, you can see the setting: Immed.settlemnt

I hope this can help you.

Best regards,

Alex.

[lisa_savinovich]

Hi Alex,

I had just started to look at this part of configuration when I got your email.  I made the change; however, I think I might need some additional setting changes in configuration as it is still showing all interest due 9/1/2015 in our test system?

Cash flow for security:

FWZZ - One condition for 8/3/2015 to 9/1/2015:

Below are the changes that I made to configuration:

Initially, I changed just the condition for variable rate interest.  Then when it did not work, I changed two additional conditions to immediate settlement that were related.  The original setting for all of these was settlement according to condition. 

If I create two conditions at FWZZ for the time period in question, the system will create a payment for 8/17/2015 (next working date) for the interest.  The problem of course is that payment is the interest related to full the $75M and not just the $1.5M.

FWZZ with two conditions:

Cash flow for the two conditions:

Kind regards,

Lisa