LEVEL PAY FLOATING NOTES

▪Level pay floating rate notes are issued for a long period of time say 20 years, with adjustment in interest rate every five years. 

▪These notes provide for level payments for time intervals during the term of the note, with periodic interest adjustments tied to an index, and 

▪Adjustments to the principal balance to reflect the difference between the portion of the payment allocable to interest and the amount of floating rate interest actually incurred. 

▪Maximum limits on upward adjustments to principal are specified at the outset to protect the lender from runaway floating exposure. 

▪The level pay note has the advantage to the issuer of having a predictable level of debt service for a period of years, thereby avoiding the uncertainties of floating debt on cash flows during that time.