Corporate action events
DRAW: Drawing
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DRAW is a partial redemption of a bond before final maturity in which the bonds to be repaid are chosen by lottery. Drawn bonds are repaid in full, the others stay outstanding, and the nominal value of each bond does not change.
- Code
- DRAW
- Usually announced as
- MAND (CHOS also allowed)
What DRAW means
Some bonds have a sinking fund or a redemption schedule under which a set amount must be retired each year. When this is done by drawing, the issuer’s agent runs a lottery on the bond numbers or on the holdings at the CSD, and the drawn bonds are redeemed at the stated price on the payment date.
Whether a particular holder is affected depends on the lottery result, not on a pro-rata share. Inside a CSD or a custodian, the drawn amount is allocated down the chain to participants and then to clients, often by a further lottery. Drawn bonds stop earning interest from the redemption date.
When you see it
- An MT564 with
:22F::CAEV//DRAWand:22F::CAMV//MAND, with the lottery date (:98a::LOTO), the redemption price and the payment date.:22F::LOTO//ORIGmarks the original lottery and//SUPPa supplemental one. A first notice may announce the drawing before the lottery, and a second notice gives the drawn quantity for the account. The SMPG grid also allows CHOS. - The SMPG redemption matrix separates it from PCAL (partial call with a reduction in nominal value for all holders), PRED (partial repayment through a pool factor), MCAL (full early call) and REDM (final maturity). With DRAW, only the drawn holders are repaid and nominal value per bond stays the same.
What to do next
- No instruction. Before the lottery, avoid moving the bonds if the account servicer says positions are frozen. After the results, check the drawn quantity for each account.
- When the MT566 arrives, reconcile the nominal debited with the drawn quantity and the cash at the redemption price. Allocate the drawn amount to underlying clients using your documented method, and stop accruing interest on the drawn bonds.