8. Intro to Bonds Flashcards
1
Q
What legislation defines MM as Regulated Market for 85(2)
A
Prospectus Directive
2
Q
How long before intended approval date of prospectus must prospectus be approved, if ADMITTING to trading for first time
A
20 WD
3
Q
3 key docs to issue a eurobond, listed or not
A
Agent docs (TD/FAA), deed of covenant and deed of guarantee
4
Q
How is coupon payable on bond
A
% of par value
5
Q
What programme can be used to reduce time spent setting up bond
A
MTN Programme
6
Q
When is a deed of guarantee required
A
If issue is guaranteed
7
Q
Why is it time-consuming to list bonds
A
DD + drafting prospectus from scratch
8
Q
What does a deed of covenant enable BHs to do
A
Allows BH to claim proportion of bond from I
9
Q
When will Listing Particulars be used - what market
A
PSM
10
Q
Who does T represent
A
BHs
11
Q
What is the issue with having FA in a secured bond, to do with clawback provisions
A
Every time BH changes, debenture would be renewed, so ‘relevant period’ for clawback goes back to 0 - could ALWAYS clawback security
12
Q
How many stages of issuing eurobond
A
6
13
Q
Legal ownership of a bearer bond is transferred how
A
By delivery
14
Q
What DoC does T have under CL
A
DoC to BHs in exercising its powers
15
Q
What is the Quoted Eurobond exemption
A
Interest can be paid free of withholding tax
16
Q
How does listing improve investor confidence
A
Requirements of listing gone through re: disclosure
17
Q
Provision where annexes can be found in PR
A
PR App 3
18
Q
What is a wholesale offer of bonds
A
Minimum denomination is at least €100k
19
Q
Why are bonds more marketable than loans
A
Must be freely transferable to be listed, and v marketable in any case if good rating
20
Q
What is a convertible bond
A
Can be exchange for shares in future
21
Q
What does 87A FSMA require
A
Disclose necessary info for investor to make informed assessment
22
Q
Stages of issuing eurobon
A
Mandate, DD, launch, Offering Doc, signing and closing
23
Q
Why is it faster for a bond issue if issuer is experienced
A
existing disclosure doc for DD + MTN Programme can be used potentially
24
Q
When is there a higher disclosure burden - retail or wholesale bond issue
A
Retail
25
What provision generally leads to whether summary required or not
PR 2.1 (2.1.4 + 2.1.3)
26
What party is REQUIRED up until bond's maturity
Fiscal Agent OR trustee
27
What is the benefit of reaching institutional investors through listing
They generally have to hold most/all of investment in listed securities
28
What provision in FSMA allows for passporting of prospectus
87H
29
Advantage of T for BH
DoC to BH + T must treat all BHs equitably, reassuring for convertible/complex bonds, can call EoD, more marketable, single professional entity
30
Who acts as trustee - what entity
Professional trust corporation
31
How many apps to admit to trading on MM
2 - one to FCA and one to LSA
32
Which 85 test is likely to apply
85(2) - no exemption
33
What is the 'mandate' stage of issuing eurobond
Issuer appoints LM under 'Mandate Letter'
34
Who does FA represent
Issuer
35
Why are loans generally more confidential than bonds
Fewer docs, fewer parties, no need to disclose to market for interest
36
Why are bonds more public than loans
Have to disclose info as part of marketing - especially if listed
37
What prospectus test is unlikely to be triggered for bonds + why
85(1) - 102B satisfied, but 86(1) exemption as sophisticated investors
38
What is Offering Doc used for
Marketing
39
Why is it easier to get larger sums through bonds
Lower risk
40
Why do bonds require issuer to have a good credit rating
If bad, less marketable, so higher interest
41
What do the pros of listing make Eurobonds
More marketable, so lower interest
42
Where is 'offer to the public' defined for 85(1)
102B
43
When will T usually call EoD
If instructed to do so by BHs
44
Why is FA cheaper
Fewer docs, lower fees, no separate legal advice, and no need for PPA
45
Cons of listing
Cost + time-consuming
46
How do you know no summary required for wholesale bonds
PR 2.1.3
47
What will issuer have to prove in order to not have to disclose required info in prospectus
Minor importance, seriously detrimental or contrary to public interest, and not likely to mislead
48
Who conducts DD
LM's S's
49
What kind of issue is it considered if listing on PSM - retail or wholesale
Wholesale
50
Benefit of listing on PSM
Does not have to produce prospectus, not comply w/ PRs
51
What is the implication of there being less of a relationship between BH and issuer?
Harder to negotiate waiver of terms, for example
52
Advantage of having T for issuer
Increased marketability and single professional entity
53
What is another impact of having sub-investment grade bonds, in terms of pool of investors
Most financial institutions cannot hold sub-investment grade bonds
54
What party will there always be in bond issue - investment bank
Lead manager
55
Legal ownership of registered bond is transferred how
By registration
56
How are bonds bought and sold - method
Electronic exchanges
57
How do you sue I if T appointed
Through T
58
Two different kinds of bonds, which determine which Annexes apply for disclosure O in prospectus
Retail or wholesale
59
When will prospectus be used - what market
MM
60
Who holds a global bond
Common depositary of all the clearing systems
61
4 things that will make bond issue complete faster
Issuer experienced, bonds not listed, PVB and investment grade
62
Who appoints T
Issuer
63
What provision in FSMA states that if listing on PSM, LP required + must be approved by FCA
79 FSMA
64
When is it likely that a bond issue will be guaranteed
If not investment grade
65
What is the 'Quoted Eurobond exemption'?
Allows interest to be paid gross to UK insurers
66
How does T get its powers
Trust deed + CL
67
Why does 85(2) not apply to PSM
PSM is not a regulated market
68
What is included in Confirmation to Managers
Key terms of their commitment, e.g. who Ms are, UW terms, commercial terms
69
What happens at the closing stage of issuing eurobond
Bonds + payment transferred
70
What Annex is required for prospectus if issue if guaranteed
Annex VI
71
What does a negative pledge for a bond usually say
New BHs to hold same rights
72
What happens at launch of bond issue
Confirmation to Managers sent to co-Ms, and co-Ms then seek investors
73
What is a retail offer of bonds
Minimum denomination is less than €100k
74
Advantage of having FA for BH
Can sue I directly
75
What does a bond's credit rating show?
Risk
76
What role does lead manager have
Adviser to issuer on issue procedure [+ listing if relevant]
77
Why is FA NOT an option if secured bond
FA = I's agent, and avoids clawback provisions in insolvency
78
On what markets are bonds bought and sold
Debt capital
79
What function does T NOT perform that FA does
T does NOT administer payments
80
Roles of FA
Administering payment of interest + principal, as well as some admin functions
81
What is the Subscription Agreement
Ms agree to be liable on J&S basis + covers issues e.g. CPs, price, R&Ws given by issuer
82
Whose interests does ICMA represent
Investors
83
What is the benefit of T being a single professional entity for issuer
Prevents multiple actions and more flexible
84
What is par value
Value of the loan to be paid back
85
Why is having T for complex/convertible bonds reassuring for BHs
T has investigative and monitoring powers
86
Definition of eurocurrency
Currency held outside of country of origin
87
Wh is a quasi-regulator of debt capital markets
ICMA
88
Cons of bonds
Requires good credit rating, more public, more regulation, higher set-up costs, can be time-consuming, and less of relationship w/ BHs
89
What two kinds of 'Offering Doc' can there be
Prospectus or Listing Particulars
90
When can bonds be very quick to set up
Plain vanilla + for fee + unlisted - max week
91
What is app to LSE when listing for
For Admission to Trading
92
What is the Agreement among Ms
Deals w/ liability & Os between Ms, repeats J&S basis + how much each M subscribed for
93
By when must Ms receive final draft of Subscription Agreement and Agreement among Ms
2 WD before signing
94
Who acts as Fiscal Agent
Bank
95
What is it called if bond has no repayment date
Perpetual bond
96
Why are there higher set-up costs for bonds
More parties, docs and regulations to comply with
97
Some pros of bonds over loans
Wider pool of investors, marketable, cheaper financing, more flexible, better for larger sums, longer maturity, can be v quick and tax exemptions
98
Why do bonds generally have cheaper financing costs than loans
Spreading risk out + marketable + fixed rate = lower interest
99
Once bonds are listed, what Os apply to issuer
Continuing Os
100
When is FA more likely - what kind of bond
PVB, unless new issuer of bonds
101
What provision allows application to FCA for exception to disclosure in prospectus if needed
PR 2.5.2R
102
What is 'coupon'
Interest
103
Why is it faster for bond issue if not listing
No prospectus + no approval from LSE/FCA
104
What LR does issuer listing bonds on PSM have to comply w/
LR 4
105
Where is the reasonable investor test in statute
87A FSMA
106
What provision states that prospectus must be approved before admission
85(2) FSMA + **PR 3.1.10**
107
Two kinds of bonds, in regard to how legal ownership can be transferred
Bear and registered
108
Starting position for disclosure Os in prospectus
87A FSMA
109
What rating is considered speculative regarding B's capacity to repay
BBB-
110
Regulation on loans?
Very few if any regs apply
111
Provision on content of prospectus
PR 2.3.1
112
What Annexes apply in prospectus for retail bonds
Annex IV, V and XXII
113
What is it called when a bond is represented in paper certificate form
Definitive bond
114
What Annexes apply in prospectus for wholesale bonds
Annex IX and XIII
115
What powers does T have
Wide powers to act on behalf of BHs, e.g. call EoD
116
When is a deed of covenant required
No T + bonds in global form
117
How does FA get its powers
FA Agreement
118
What is the tax exemption applicable for bonds
'Quoted Eurobond exemption'
119
Why is PPA required if T used
T cannot administer payments
120
Why does having T increase marketability
Increases confidence of BHs
121
What is the max maturity for loans, generally
7 years
122
Provision on format of prospectus (e.g. single or separate)
PR 2.2
123
When is the closing stage of issuing eurobond
1/2 days after signing
124
What is the MTN Programme
If large C issuing bonds frequently, agrees w/ bank for bank to manage future bond issues up to £X w/ a base prospectus
125
What is a global bond
Represents total amount of bond
126
Why is it costly to list bonds
Legal fees considerably higher + FCA and LSE both charge fee
127
When is the bond repaid
At maturity
128
Definition of eurobond
Either bond denominated in eurocurrency or domestic but sold internationally
129
How long is prospectus valid for after approval + provision
12 months, PR 5.1.1
130
Difference between coupon on bonds and interest on loans
More flexible for bonds, and usually fixed rate
131
When might bonds be time-consuming to set up
If complex bond or listed
132
How are bonds generally more flexible than loans
Not an absolute negative pledge and longer GP for non-payment
133
Advantage of having FA for issuer
DoC owed to I, cheaper
134
What two docs are signed during issue of eurobond process
Subscription Agreement and Agreement among Ms
135
3 pros of listing bonds
Investor confidence, reach institutional investors and Quoted Eurobond exemption
136
Who draws up Offering Doc
LM
137
What provision outlines approval process for prospectus
PR 3.1
138
Why do bonds offer wider pool of investors than loans
Not limited to banks + minimum denomination can be low
139
What additional party will be required if T being used
Principal Paying Agent
140
Two kinds of bonds (in terms of features)
Plain vanilla and convertible
141
When is FA NOT an option
If secured bond
142
What provision outlines docs to submit for approval of prospectus
PR 3.1.-1
143
What is app to FCA when listing for
Admit to Official List
144
Is the common depositary the legal owner of the global bond?
No - only the custodian
145
First document signed between issuer and Managers when issuing bond
Confirmation to Managers
