The following example for a mandatory exchange offer corporate action illustrates the use of two options you can select for the Treatment of Interest Indicator that allow you to generate the coupon based on ex date rather than on coupon date. These options include Receive Income Accrued to Ex Date and Receive Income Accrued to Pay Date. It also shows how you can define a Payment Override Factor for an exchange offer For more information about the Treatment of Interest Indicatorthese options, see About Earnings for Exchange Offers and Conversions.
...
- The system creates a receivable/payable record (coupon) on the From security based on the ex-date minus one Local and Base PTD accrued values. In this case Accrued PTD is 11,944.45 and Accrued Interest Purchased is 833.33, resulting in a coupon on ex date (10/4) for 12,777.78. Additionally, Eagle Accounting creates a close of the From security and an open of the To security with a cost of 1,009,395.19.
- No accruals or amortization occur on or after the ex date as part of processing the corporate action.
If you set the Treatment of Interest Indicator to Receive Income Accrued to Ex Date and additionally define a Payment Override Factor value of 1.5:
- The system creates a receivable/payable record on the From security on the ex date based upon the Payment Override Factor
- Assuming the same values used above in as the Receive Income Accrued to Ex Date example and a Payment Override Factor of 1.5, the new coupon on the ex date (10/4) is for 15,000 ((1,000,000 * 1.5)/100).
- The new adjusted Accrued PTD after payment override is 14,166.67 (15,000 – 833.33) (Accrued Interest Purchased.)
If you set the Treatment of Interest Indicator to Receive Income Accrued to Pay Date:
...