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LPC Law Notes Debt Finance Notes

Issuing And Listing Bonds Notes

Updated Issuing And Listing Bonds Notes

Debt Finance Notes

Debt Finance

Approximately 80 pages

A collection of the best LPC Debt Finance notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". In short these are what we believe to be the strongest set of Debt Finance notes available in the UK this year. This collection of notes is fully updated for ...

The following is a more accessible plain text extract of the PDF sample above, taken from our Debt Finance Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Issuing and Listing Bonds

  • Issuing an unlisted eurobond:

    1. Mandate letter (appointing lead manager)

    2. Due diligence conducted by lead manager

    3. Launch - formal announcement of planned issue - confirmation to co-managers.

    4. Offering document to assist in marketing (aka "placement moratorium')

    5. Signing of subscription agreement and agreement among managers - joint and several basis.

      1. Pricing the bonds

      2. Delivery of auditors' first comfort letter

      3. Finalising and issuing offering document

      4. Signing agreements

    1. Finalising documents:

      1. Legal opinions

      2. Auditors' second comfort letter

      3. Trust deed/fiscal agency agreement

      4. Paying agency agreement

      5. Closing certificates

    1. Closing - transfer of bonds to managers and funds to the issuer. Need (in addition to docs above):

      1. Issuer's closing certificate

      2. Global bond

      3. Cross-receipt letter

      4. Payment instructions to common depository

Usually, money and bonds change hands simultaneously - payment against delivery.

Classic global note structure: lead manager co-ordinates payment through clearing systems, depository acts as go between.

  • Listed eurobond - s.85(2) FSMA:

  • Due diligence driven by compliance with disclosure rules (Prospectus requirements)

  • Specific requirements if listed - listing particulars/prospectus - s.85(1) and (2) FSMA.

    • Prospectus not needed if to qualified investors - s.86(7) or fewer than 150 non-qualified investors. Need listing particulars instead - s.79 FSMA: lower level of disclosure as bonds sold "wholesale"

  • Enter onto the "Official List" by the UKLA

  • Admission to trading on a regulated market.

    • LSE = main market - need Prospectus (s.85(2) FSMA)

    • PSM: for specialist securities - does not constitute a regulated market.

  • If listed:

    1. UKLA must confirm the prospectus has been approved.

    2. Application for listing

    3. Application for admission to trading.

Listing

Advantages Disadvantages
  • Makes bond more marketable, particularly in OTC trading = lower interest.

    • Investors more confident in quality of information as a result of compliance with listing rules;

    • Issuer has access to institutional investors who can generally only hold listed securities;

    • Issuer benefits from eurobond exemption (pay interest free of withholding tax)

  • Cost: UKLA and LSE charge a fee and legal fees will be higher;

  • Timing: listing process is more time consuming particularly for a new issuer.

  • 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)

  1. Obtaining a listing

    • Comply with procedure in LR 3.4: submit completed application for...

Buy the full version of these notes or essay plans and more in our Debt Finance Notes.