The discussion focussed on 7 keys steps to issuing a bond.
The first place to start is to understand what information is required. You may need to look at the following issues:
Some of the required information may take time to collect so early preparation is always recommended.
Start by speaking to your legal team, and it may also be useful to speak to your auditors at this point too. Both can help you understand the information requirements and what gaps may exist.
When you appoint your legal, accounting and book runner teams you need to ask them direct questions such as:
This will help you to understand the timeline and, importantly, the pinch points.
Many issuers will already have a credit rating. If your company doesn’t, or the issuing entity is not rated, you may need to select a rating agency and work with them to get a rating. Depending on the complexity of the business and their familiarity with your company, this may take time. There may also be a discussion about what is needed to improve the rating through, for example, changes to the capital structure.
This is the main marketing document and should contain verified information about the company. It can take a considerable amount of time and effort to verify what is in the document – this is done predominantly through working with your legal team. The prospectus can often go through a number of updates and you should ensure that you factor in this time.
This is mainly done via a roadshow where investors are given an opportunity to ask questions and review the material you have produced. Be prepared as they will ask lots of questions! You will typically have 24-48 hours to respond so you need to make sure you can lean on your advisors and if possible have someone back in the office who can help.
Depending on the type of deal (e.g. non-deal roadshow, deal roadshow or country of issuance) you may have anything from 2-3 days to 10 days to price.
Typically, all the legal documents need to be signed two days after the deal has been completed. The funds need to settle to the issuer, normally net of fees, within five days of the deal being completed.
Having talked through how to issue a bond we asked the key advisors to explain their roles and what treasurers can do to make the process run smoothly. Here is what they said:
It’s good to have a preliminary conversation with your legal advisors early on. If you have already issued a bond then you can update/work with the documents you have previously prepared or if you have audited accounts this is a good place to start.
Work with them on the prospective and the presentations – it is essential that there is consistency between the roadshow presentation materials and the prospectus – and your legal advisors should review all documentation together.
Companies need a rating for two key reasons:
For regulatory reasons especially when working with banks and insurance companies
But how does it work in reality? If you need a rating for the first time and are an established company then you are likely to be able to provide financials and management information and you can usually receive a rating within two weeks. If you have never been rated before this can take longer – normally 3-4 weeks. As you become a more established issuer the lead time shortens.
The key message from the credit agency perspective is to talk to your analyst and explain what you are raising funds for - for example, acquisition or restructuring. Everything you provide them is confidential and it is always better to be open and transparent.
Auditors would normally provide a comfort letter to say that all the information in the prospectus has been verified and that management has provided suitable reps and warranties. In addition to the comfort letter, they would also be involved in the detailed financial disclosures, so the sooner you contact them the better.
The book runner co-ordinates the different workstreams. They need to be involved from the very beginning and have an understanding of the specifics of the transaction. They would look at a number of areas including:
Crucially they provide a timetable and help align the investors (such as fund managers/pensions managers) with the issuer’s expectations.
Finally, we asked the panel for their top tips for issuing a bond:
Our thanks go to Slaughter and May for hosting the event and to our speakers: Courtney Huggins, Treasurer, Logicor; Oliver Storey, Partner, Slaughter & May; Gianluca Spinetti, Senior Director, Fitch Ratings; Sunil Kainth, Natwest Markets; James Miller, PwC and Sean Anderson, Head of Tax & Treasury, University of Oxford.
