#15473 - Issuing And Listing Bonds - Debt Finance

Issuing and Listing Bonds

Listing

• Issuers of eurobonds admitted to the Professional Securities Market are subject to a potentially lesser degree of regulation.

  • No prospectus needed, but will need listing particulars.

• Prospectus Directive applies to any offer to the general public (listed or unlisted)

• If another EU Member State authority has approved a prospectus, it will not be necessary for the UKLA to approve the prospectus again to allow an admission to trading in the UK - "European Passporting"

• Issuers of listed securities have continuing obligations during the life of the listing, including for example on-going disclosure obligations

Listing eurobonds:

1. Approval of Prospectus

   • Documents listed in PR 3.1.1 and Article 2(2) must be submitted to the UKLA 10 clear working days before intended approval date of prospectus (20 days if first time issuer)

     • Takes approximately 3 days to review each draft - can need more than one.

   • PR 3.1.1 and Article 2(1): all drafts must be submitted in searchable electronic format via electronic means.

   • Content

     • Denomination of the securities being issued is key.

       1. Retail = minimum denomination under 100,000 (or its equivalent in another currency) <-- more disclosure

       2. Wholesale = minimum denominations of 100,000 or more (or its equivalent in another currency) - or admitted to PSM

          • Less disclosure

          • Summary not needed (PR 2.1.3)

          • Non-EU issuers need not prepare financial information under International Accounting Standards.

     • Section 87A FSMA sets out the general duty of disclosure: must contain "necessary information" - s.87A(1) which is "necessary to enable investors to make an informed assessment of (a) the assets and

liabilities, financial position, profits and losses, and prospects of the issuer and any guarantor; and (b) the rights attaching to the transferable securities” - s.87A(2)

• Components of prospectus - PR 2.2

  • Summary (where retail issue)

  • Registration document (about issuer)

  • Securities note (details of securities)

• Areas of information - PR 2.3 and PR 2.1.4

  • Persons responsible

  • Information about the securities

  • Information about the issuer, its business and group structure

  • Detailed financial information

  • Management personnel

  • Risk factors relating to both issuer and securities.

• UKLA can authorise information to be omitted from a prospectus in the circumstances set out in s.87B FSMA:

  • Disclosure contrary to public interest

  • Disclosure would be seriously detrimental to issuer (and omission unlikely to mislead the public)

  • Information is only of minor importance

Must apply at the latest with the first draft of prospectus - PR 2.5.3 and Article 2(2)(b) (info may only be omitted after application submitted and approved by UKLA)

2. Obtaining a listing

   • Comply with procedure in LR 3.4: submit completed application for admission to the Official List and an approved prospectus (+ other documents, e.g. board minutes authorising issue) at least 2 days before listing is to be effective.

3. Admission to trading

   • Comply with procedure in LR 3: in practice this takes place at the same time as the application for listing.

• Prospectus drafted by lead manager's solicitors and auditors together with lead manager and issuer.

  • Several month if new issuer;

  • Month if only updating base prospectus under the MTN Programme and drafting final terms.

• Prospectus stages

  • Verification: if emerging market/low credit rating (evidence gathering)

  • Annotated version of prospectus: showing where and how issuer has complied with relevant PR + cross reference checklist (PR 3.1.1A).

    • Type of checklist depends on whether sale is retail or wholesale and additional checklists for each guarantor.

• Liability for prospectus:

  • Section 84(1)(d) FSMA provides that the PR are able to determine who is responsible - PR 5.5.4:

    • Issuer

    • Each person accepting responsibility (stated in prospectus as doing so) - e.g. auditors accepting responsibility for financial information.

    • Guarantor of information relating to it and the guarantee

    • Each person authorising the contents of prospectus

  • s.90(1) FSMA: civil liability to compensate for false or misleading statements or omissions (Schedule 10 FSMA = defences - (a) reasonably believed statement was not misleading or (b) issued a correction and took reasonable steps to publish correction).

    • Any person responsible will pay compensation to any purchaser of bonds.

  • Other liabilities:

    • Negligent misstatement (Hedley Byrne v Heller): need duty of care.

    • Misrepresentation: need reliance

    • Breach of contract: only managers can sue for breach of subscription agreement.

    • Tort of deceit: need to show intention to deceive.

    • Criminal liability (ss.89-95 FSMA + Theft Act 1968 and Fraud Act 2006)