Debt Capital Markets PDF

Debt Capital Markets SILE Part B Course What we’re going to cover: 01 Bonds and bond markets 02 Structure of a bond transaction 03 Prospectuses and prospectus exemptions © SILE Allen |&Debt Overy Capi...

Debt Capital Markets SILE Part B Course What we’re going to cover: 01 Bonds and bond markets 02 Structure of a bond transaction 03 Prospectuses and prospectus exemptions © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Bonds and bond markets  What is a Bond? 01 Instrument constituting or evidencing a debt Issuer promises to repay the principal amount it has borrowed 02 from the bondholder at a certain specified time in the future Return in the form of interest on specified interest 03 payment dates © Allen & Overy LLP | Debt Capital Markets © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Reasons for Undertaking a Bond Issue Advantages of bonds compared to bank loans 01 02 03 04 05 Access to a broader Fewer covenants More flexible Frequently Disclosure on investor base than in a syndicated interest unsecured issuer usually loan rate options limited to information that is publicly available, for example, financial statements rather than detailed management accounts © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Eurobond vs Domestic Bond Eurobond Domestic Bond Bonds denominated in a currency Bonds issued to domestic investors in other than that of the country or their domestic currency countries in which they are sold © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Benefits of International Debt Capital Markets 01 Advantages 02 Disadvantages – Larger pool of investors – More regulatory and compliance issues – Larger supply of funds – Reduced cost of funds (“price for borrowing money”) © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Standalone vs Medium-Term Note Programmes 01 Standalone issuance – A single issuance by an issuer of bonds with specified terms, maturity and interest rate 02 Medium-term note programme – A framework of agreements designed to facilitate the quick, cheap and frequent issue of a wide range of debt securities by issuers © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Wholesale vs. Retail Bond Markets Wholesale bond market Retail bond market ‒ Offered only to specified investors ‒ Offered to all investors, including in larger demoninations retail investors ‒ Usually traded over-the-counter ‒ Traded on the exchange after issuance © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Structure of a bond transaction Who Are the Key Participants? Appointment of trustee Trustee Issuer (if required) Appointment of Appointment of managers to paying agent market bonds Duty bound to act Initial bond Interest and proceeds principal in interests of bondholders Paying agent Managers Bondholders Representative of bondholders © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Who Are the Key Participants? Appointment of trustee Trustee Issuer (if required) Appointment of Appointment of managers to paying agent market bonds Duty bound to act Initial bond Interest and proceeds principal in interests of bondholders Paying agent / Managers Bondholders Fiscal agent Representative of bondholders © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Prospectuses and prospectus exemptions Key Documentation 1 Prospectus or offering circular 5 Trust deed 2 Subscription agreement 6 Forms of global bonds and definitive bonds 3 Agency agreement 7 Terms and conditions of bonds 4 Deed of covenant © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Prospectus 01 Main offering document 02 Principally a legal and disclosure document, not a marketing document 03 Must contain all information that an investor would reasonably require to make an informed assessment 04 Offence to offer securities without a prospectus unless there is an exemption © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets Exemptions from Issuing a Prospectus ‒ Offers to specified investors 01 ‒ Specified investors: institutional and accredited investors ‒ Information memorandum ‒ Issuer already listed on a stock exchange 02 ‒ Offer information statement ‒ Others 03 ‒ Bond Seasoning Framework ‒ Exempt Bond Issuer Framework © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets  Copyright Notice “ Copyright © 2021, Singapore Institute of Legal Education. All rights reserved. This video is protected by the copyright laws of Singapore. No redistribution, reproduction or editing of this video in whole or in part in any form or medium is allowed without the express written permission of the Singapore Institute of Legal Education. “ © SILE Allen |&Debt Overy Capital LLP | Markets Debt Capital Markets 0010023-0028844 SNO1: 2005370880: 2