Corporate action events
PRED: Partial Redemption Without Reduction of Nominal Value
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PRED announces that part of the principal of a security is repaid without reducing the nominal held: the repayment is expressed through a lower pool factor. It is mandatory and typical of asset-backed and mortgage-backed securities.
- Code
- PRED
- Usually announced as
- MAND
What PRED means
Factored securities, such as asset-backed and mortgage-backed bonds, repay principal over time as the underlying loans are repaid. The original nominal on the holder’s account stays the same; what changes is the pool factor, the share of the original nominal still outstanding. In ISO 20022 the code is named Partial Redemption With Pool Factor Reduction.
The notification gives the previous factor (:92a::PRFC) and the next factor (:92a::NWFC). The repaid rate is the difference between them, and the cash per holder is the original nominal times that difference times the redemption price. No securities move (ECB SCoRE rulebook: MAND, CASH, no securities movement).
When you see it
- In an MT564 each time a factor changes, usually on the same date as the interest payment (INTR), which is a separate event.
- PRED vs PCAL: PCAL reduces the nominal held; PRED keeps it and changes the factor. PRED vs PRII: PRII combined principal and interest in one event; it is gone from seev.031 since version 10, and the ISITC US market practice announces the principal as PRED and the interest as INTR.
What to do next
- No instruction. Update the factor in your security master on the factor date; current face equals original face times the factor.
- On the MT566, reconcile the principal cash with original nominal times (previous factor minus next factor). A mismatch usually means a stale factor in your books.
- Use the new factor for valuation, collateral and the next interest calculation.
Where it appears in MT and ISO 20022
MT (ISO 15022)
- MT564 sequence A (GENL),
:22F::CAEV//PREDwith:22F::CAMV//MAND - MT564 sequence D,
:92a::PRFC(previous factor) and:92a::NWFC(next factor) - MT566 sequence A,
:22F::CAEV//PRED