Legal Update for Corporates
Finance & Treasury
26 September 2019
Tapping the financial markets
Equity, debt, asset-backedand hedging
26 September 2019
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Speakers
Marieke Driessen
Partner, Financial Markets
Simmons & Simmons Amsterdam
T +31 20 722 2308
Peter Voorhees
Partner, Financial Markets
Simmons & Simmons Amsterdam
T +31 20 722 2330
Jeroen Bos
Partner, Financial Markets
Simmons & Simmons Amsterdam
T +31 20 722 2343
Rezah Stegeman
Partner, Financial Markets
Simmons & Simmons Amsterdam
T +31 20 722 2333
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Contents
Context
Equity
Debt
Asset-backed
Hedging
Context
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Context
Corporate finance
– Assets:
Real estate
Projects
Claims
– Liabilities:
Equity (EV)
Debt (VV)
Asset-backed
Hedging
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Context – hot legal topics
Legal sources:
EU law: Prospectus Regulation, Securitisation Regulation, PRIIPs, MiFIDII, Market Abuse Regulation, CRD/CRR, BRRD, Benchmark Regulation, EMIR, …
Dutch law: books 2, 6, 7 Dutch Civil Code, Corporate Governance Code, Wet financieel toezicht, Euronext Rulebooks, case law (Ondernemingskamer, NCC)
English law
US law: Securities Act, Securities Exchange Act (Rule 144A, Reg S, 10b5 letter), US Risk Retention rules.
Future: benchmark reform, ESG, regulatory capital (banks, investment firms, insurers), deregulation in US, Brexit, proposal to abolish contractual assignmentlimitations, European conflict of law rules regarding assignment of receivables
Equity
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Equity capital markets
IPO
Secondary listings
Dual listings
Employee stock option plans
Share buy-backs
Public offers
Role of US law in equity capital markets
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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How is equity raised?
IPO PROCESS: PARTIES:
Getting issuer IPO-ready
Issuer appoints arrangers
Issuer and arrangers appoint legal counsel, auditors, other third parties
Due diligence, corporate governance, protective measures, publicityguidelines, prospectus etc.
Investor meetings, analyst research reports, site visits
Announce to market, price discovery, price range
Roadshows, (accelerated) bookbuilding
Pricing
Allocation
Signing
Closing, settlement, listing
Issuer (boards, works council)
Arrangers, managers, dealers
Agents (paying agent, calculation agent, listing agent), opinion/comfort providers, rating agencies
Analysts
PR
Clearing systems
Regulatory authorities (AFM, …)
Stock exchange
Rating agencies
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Tips & tricks for in-house counsel/treasury
Role of in-house team
Covenants in finance documentation
Disclosure obligations
Press releases
Corporate governance; corporate approvals
Prospectus rules: disclosure, financial, non-financial
Sanctions legislation
Mandatory prepayment – Exit Upon the occurrence of:(i) any Flotation; or(ii) a Change of Control; or(iii) the sale of all or substantially all of the assets of the Group whether in a single transaction or a series of related transactions,the Facilities will be cancelled and all outstanding Utilisations and Ancillary Outstandings, together with accrued interest, and all other amounts accrued under the Finance Documents, shall become immediately due and payable.
Debt
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Debt financing
Loans:
– bilateral, club deal, syndicated
– in-house standards, LMA-style, LMA light
– secured/unsecured
– asset based: real estate, projects, aircraft, shipping, receivables
Debt: programmes, stand alone issuances
– Plain vanilla: fixed rate; floating rate
– Structured bonds: linked
– High yield bonds
– Convertible bonds
– Regulatory capital
– Commercial paper
– Schuldschein, NSV
– Asset-backed bonds
– Project, green, social, water … bonds
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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How are bonds issued?
PROCESS: PARTIES:
Issuer resolves upon funding
Issuer appoints arranging banks
Issuer appoints legal counsel, auditors, other third parties
Banks look for investors: private placement vs public offering: roadshows, (accelerated) bookbuilding
Pricing
Signing subscription agreement
Satisfaction conditions precedent
Closing and settlement
Listing
Rating
Issuer (boards, works council)
Arrangers, managers, dealers
Agents (paying agent, calculation agent, listing agent), opinion/comfort providers, rating agencies
Trustee, noteholder representative
Clearing systems
Regulatory authorities (AFM, …)
Stock exchange
Rating agencies
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Tips & tricks for in-house counsel/treasury
Role of in-house team
Dutch law vs English law vs US law
Covenants in other documentation
Disclosure obligations
Press releases
Corporate approvals
Undertakings, Events of Default
Disclosure rules: prospectus
Sanctions legislation
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Tips & tricks
Role of in-house team
Example of debt covenants:
Negative pledge: So long as any of the Notes remains outstanding, the Issuer will not, and will ensure that none of its Material Subsidiaries will, create or permit to subsist any Security upon the whole or any part of its assets or revenues, present or future, to secure any Indebtedness, except for Permitted Encumbrances, unless:(A) the same Security shall forthwith be extended equally and rateably to secure all amounts payable under the Notes, any related Receipts and Coupons and the Trust Deed to the satisfaction of the Trustee; or(B) such other Security or guarantee (or other arrangement) as (i) the Trustee in its absolute discretion deems not materially less beneficial to the interests of the Noteholders or (ii) shall be approved by an Extraordinary Resolution, shall previously have been or shall forthwith be extended equally and rateably to secure all amounts payable under the Notes, any related Receipts and Coupons and the Trust Deed.
Asset-backed
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Asset-backed
Transactions for corporates
Receivables financing transactions (e.g. factoring, reverse factoring, tradereceivables securitisations, secured lending deals)
Securitisation: residential mortgage loan receivables, buy-to-let loan receivabes, commercial real estate receivables, car lease receivables etc.
Covered bonds (financial sector)
Loan portfolios sales (e.g. legacy portfolio sales, forward flow arrangements)
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Tips & tricks
Role of in-house team
Focus on relevant receivables:
– how are agreements documented (General T&Cs, bespoke contracts)
– governing law
– do receivables result from licensed activity
– is set-off allowed or excluded
– confidentiality provisions
Wider questions:
– do other finance documents (loan docs or note docs) allow for sale of assets
– are relevant collection accounts part of a cash pooling system
– who is involved in client contact (need to involve sub-servicers?)
– compliance with reporting requirements
– need to achieve certain accountancy treatment
Derivatives
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Derivatives
Types of contracts
Finance linked swap
– To hedge a borrower’s interest rate or currency risk under a particular debtinstrument
M&A related swap
– Deal-contingent FX forward transaction
Repurchase transactions (repo)
– Short-term secured funding (can be rolled over); or
– Financing; hedges both the credit and liquidity risks of lenders
Documentation
– ISDA Master Agreement (ISDA)
– Global Master Repurchase Agreement (GMRA)
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Documentation
Role of in-house team
The primary documents involved in a loan hedging matter are:
– Facilities Agreement
– Intercreditor Agreement
– ISDA (Master Agreement and Schedule)
– Confirmations
– Hedging letter
– Sets out the hedging policy/ hedging requirements
The standard ISDA provisions would cut across the negotiated position under the facility agreement and other finance documents if not amended.
It is often the case that the hedging agreements are only presented at the end of a transaction, as a condition precedent to drawdown of the loan and as a 'standard' document to be executed.
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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Tips & tricks
Role of in-house team
Stand-alone document or loan linked?
What to think about in relation to hedging requirements:
– What percentage of the loans will be hedged?
– When will the hedging terminate?
– Is over-hedging permitted?
– When are the borrower and the hedge counterparty allowed to terminate or close out the hedge?
What to think about in relation to:
– Events of Default/Termination Events
– termination of the hedge and repayment of the loan
– ring-fencing
– consistency between the finance documents
Consider EMIR (now one-sided reporting)
This document is for general guidance only. It does not contain definitive advice. SIMMONS & SIMMONS and S&S are registered trade marks of Simmons & Simmons LLP. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated practices. Accordingly, references to Simmons & Simmons mean Simmons & Simmons LLP and the other partnerships and other entities or practices authorised to use the name “Simmons & Simmons” or one or more of those practices as the context requires. The word “partner” refers to a member of Simmons & Simmons LLP or an employee or consultant with equivalent standing and qualifications or to an individual with equivalent status in one of Simmons & Simmons LLP’s affiliated practices. For further information on the international entities and practices, refer to simmons-simmons.com/legalresp. Simmons & Simmons LLP is a limited liability partnership registered in England & Wales with number OC352713 and with its registered office at CityPoint, One Ropemaker Street, London EC2Y 9SS. It is authorised and regulated by the Solicitors Regulation Authority. A list of members and other partners together with their professional qualifications is available for inspection at the above address.
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Questions?
© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
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