Debt Financing through the issue of corporate bonds

The issuers of fixed income securities (i.e. bonds) are very different and there are various reasons why corporate bonds are issued. For example, capital raised may be used by the issuer for the financing of current operations or planned business expansion, for the funding of any form of investment, and also for securing financial resources necessary for the development of a specific project. A bond may also be issued for the purpose of refinancing other liabilities such as bank loans. In reality, it has been observed that funds raised are used for a combination of growth financing and refinancing. Whichever the case may be, the purpose of the bond issue should clearly be stated in the offering document (information memorandum or prospectus) along with a detailed description of the transaction structure.

Type of placement

For the placement of the bond, differentiation is made between a public offering and a private placement.

Public Offering

In accordance with the legal definition in Article 2(d) of Regulation (EU) 2017_1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the “Prospectus Regulation”), an offer of securities to the public means a communication to the public in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe for these securities. This definition also applies to the placing of securities through financial intermediaries.

The mere admission of securities to trading on a multilateral trading facility or the publication of bid or offer prices does not constitute an offer of securities to the public per se. A prospectus should thus only be required in such cases if these activities involve a communication that constitutes an offer of securities to the public under the Prospectus Regulation.

Private Placement

As the name suggests, a “private placement” is a private alternative to issuing, or selling, a publicly offered security as a means for raising capital. In a private placement, both the offering and sale of securities is made between the issuer and a select number of qualified investors. There may be as few as one investor for any issue. The three most important features that would easily classify a securities issue as a private placement are:

• The securities are not publicly offered;
• The securities are not required to be registered with a competent authority; and,
• The investors are limited in number and are all “qualified”.

Type of Issue

In addition to the type of placement, differentiation is made between own issues and third-party issues.

With own issues, the issuer manages subscription money and the distribution of payments whilst financial institutions only provide service functions. With third-party issues the banks, placement consortia or other capital brokers manage subscription money and relevant distribution for a fee.

Depending on the type of placement and type of issue, the main focus of our work is to directly use our existing network of financial intermediaries (banks, electronic money institutions, intermediary brokers) for a successful placement of small to mid-cap corporate bonds. We will provide advice on the development of a custom-made structure carefully designed to secure a certain degree of security for the successful placement of the bond and to reduce relevant issuing costs.

Secqoia is a one-stop shop for advisory services

The complexity of different bond projects can result in diverse requirements for the issuer.

Secqoia is able to provide comprehensive consulting services during the structuring process. Under a power of attorney, we can administer the whole process from a to z.

The following summarizes our consulting services

• Examination of the case and conducting of enhanced due diligence
• Incorporation of special purpose vehicles (SPVs) in the case where such vehicles are required to act as issuers
• Consultation on the allocation of the SPV shares to sanctions free shareholder(s) and appointment of fit and proper director(s)
• Appointment of statutory auditors and registration with tax authorities
• Drafting of board resolutions, power of attorneys and other agreements
• Consultation on proper determination of bond characteristics and contract specifications
• Conducting of business valuation
• Preparation of business plan
• Consultation on transaction structure
• Consultation on preparation of information memorandum
• Securing of LEI, ISIN, CFI and FISN identifiers
• Consultation on listing, when and if required
• Consultation on the preparation of security information sheet and registration with competent authorities
• Consultation on the preparation of Key Investor Information Document
• Integration with financial intermediaries (credit and/or electronic money institutions, investment firms, licensed registrars, transfer/paying agents)
• Consultation on design and execution of marketing campaigns
• Administration of CSD Account (submission of instructions to transfer/paying agent, calculation of accrued interest etc.)
• Continuous support on compliance, operational and marketing issues throughout the process

For more information, to discuss your debt financing needs and to receive a preliminary quotation, please feel free to contact us.