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Publication Date

3-1976

Document Type

Article

Abstract

Rarely, if ever, have we seen a world in which trade has been carried out and investments made across national frontiers through the medium of freely available convertible currencies. The growth of multinational corporations on a large scale has, in the middle of the twentieth century, put the problem of transferability, convertibility, and financing to the forefront of the businessman's major problems. While it is true that the currencies of Western Europe and the other major trading partners of the United States are largely convertible for purposes of current account transactions, and while it is true that major banking groups have flooded the world with branches and other entities capable of making instant money transfers, nevertheless, businessmen today live in a world where exchange and currency controls are the rule rather than the exception. The problems of these controls, together with a cost engendered in taxation by one or more jurisdictions, make the transfer of funds and the building of financing packages as difficult today as any time in the last twenty years. As taxing statutes and exchange control regulations have been enacted, bankers and their advisors have responded, with greater or lesser efficiency and dispatch, with the creation of new types of financing packages suitable for multinational investment. At times aggressive and imaginative, these advisors have frequently been timid and prosaic in their schemes. One glaring example is the period from the enactment of the Interest Equalization Tax Extension Act of 1971 (permitting, for the first time, the issuance of Eurocurrency bonds by U.S. corporations without the medium of an international finance subsidiary) to the time of the first actual issuance, nearly one year later. The principal reason for the delay was the feeling by "some bankers in Europe" that the new vehicle "might" prove unattractive to the customers of Swiss banking institutions. The ready and rapid success of the Revlon placement and other issues in the second half of 1972 served to eliminate these fears and most subsequent issues followed the lead in structuring the bonds accordingly.

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