Equity Commitment Note - ECN

A type of mandatory convertible bond issued by a bank or other lending institution that qualifies as regulated capital. A equity commitment note is redeemed when the sale or issue of securities is made at a future date by the issuing bank or lending institution. The Federal Reserve sets a maximum maturity of 12 years and requires that the issuing company fund one-third of the equity every four years.

Holding an equity commitment note is different than holding an equity contract note in that an investor is not required to purchase securities. The note is instead redeemed at a later time through the sale of either common or preferred stock.