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CF > 8. Intro to Bonds > Flashcards

8. Intro to Bonds Flashcards

1
Q

What legislation defines MM as Regulated Market for 85(2)

A

Prospectus Directive

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2
Q

How long before intended approval date of prospectus must prospectus be approved, if ADMITTING to trading for first time

A

20 WD

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3
Q

3 key docs to issue a eurobond, listed or not

A

Agent docs (TD/FAA), deed of covenant and deed of guarantee

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4
Q

How is coupon payable on bond

A

% of par value

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5
Q

What programme can be used to reduce time spent setting up bond

A

MTN Programme

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6
Q

When is a deed of guarantee required

A

If issue is guaranteed

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7
Q

Why is it time-consuming to list bonds

A

DD + drafting prospectus from scratch

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8
Q

What does a deed of covenant enable BHs to do

A

Allows BH to claim proportion of bond from I

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9
Q

When will Listing Particulars be used - what market

A

PSM

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10
Q

Who does T represent

A

BHs

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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

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12
Q

How many stages of issuing eurobond

A

6

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13
Q

Legal ownership of a bearer bond is transferred how

A

By delivery

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14
Q

What DoC does T have under CL

A

DoC to BHs in exercising its powers

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15
Q

What is the Quoted Eurobond exemption

A

Interest can be paid free of withholding tax

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16
Q

How does listing improve investor confidence

A

Requirements of listing gone through re: disclosure

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17
Q

Provision where annexes can be found in PR

A

PR App 3

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18
Q

What is a wholesale offer of bonds

A

Minimum denomination is at least €100k

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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

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20
Q

What is a convertible bond

A

Can be exchange for shares in future

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21
Q

What does 87A FSMA require

A

Disclose necessary info for investor to make informed assessment

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22
Q

Stages of issuing eurobon

A

Mandate, DD, launch, Offering Doc, signing and closing

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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

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24
Q

When is there a higher disclosure burden - retail or wholesale bond issue

A

Retail

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25
Q

What provision generally leads to whether summary required or not

A

PR 2.1 (2.1.4 + 2.1.3)

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26
Q

What party is REQUIRED up until bond’s maturity

A

Fiscal Agent OR trustee

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27
Q

What is the benefit of reaching institutional investors through listing

A

They generally have to hold most/all of investment in listed securities

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28
Q

What provision in FSMA allows for passporting of prospectus

A

87H

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29
Q

Advantage of T for BH

A

DoC to BH + T must treat all BHs equitably, reassuring for convertible/complex bonds, can call EoD, more marketable, single professional entity

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30
Q

Who acts as trustee - what entity

A

Professional trust corporation

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31
Q

How many apps to admit to trading on MM

A

2 - one to FCA and one to LSA

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32
Q

Which 85 test is likely to apply

A

85(2) - no exemption

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33
Q

What is the ‘mandate’ stage of issuing eurobond

A

Issuer appoints LM under ‘Mandate Letter’

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34
Q

Who does FA represent

A

Issuer

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35
Q

Why are loans generally more confidential than bonds

A

Fewer docs, fewer parties, no need to disclose to market for interest

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36
Q

Why are bonds more public than loans

A

Have to disclose info as part of marketing - especially if listed

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37
Q

What prospectus test is unlikely to be triggered for bonds + why

A

85(1) - 102B satisfied, but 86(1) exemption as sophisticated investors

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38
Q

What is Offering Doc used for

A

Marketing

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39
Q

Why is it easier to get larger sums through bonds

A

Lower risk

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40
Q

Why do bonds require issuer to have a good credit rating

A

If bad, less marketable, so higher interest

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41
Q

What do the pros of listing make Eurobonds

A

More marketable, so lower interest

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42
Q

Where is ‘offer to the public’ defined for 85(1)

A

102B

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43
Q

When will T usually call EoD

A

If instructed to do so by BHs

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44
Q

Why is FA cheaper

A

Fewer docs, lower fees, no separate legal advice, and no need for PPA

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45
Q

Cons of listing

A

Cost + time-consuming

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46
Q

How do you know no summary required for wholesale bonds

A

PR 2.1.3

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47
Q

What will issuer have to prove in order to not have to disclose required info in prospectus

A

Minor importance, seriously detrimental or contrary to public interest, and not likely to mislead

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48
Q

Who conducts DD

A

LM’s S’s

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49
Q

What kind of issue is it considered if listing on PSM - retail or wholesale

A

Wholesale

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50
Q

Benefit of listing on PSM

A

Does not have to produce prospectus, not comply w/ PRs

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51
Q

What is the implication of there being less of a relationship between BH and issuer?

A

Harder to negotiate waiver of terms, for example

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52
Q

Advantage of having T for issuer

A

Increased marketability and single professional entity

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53
Q

What is another impact of having sub-investment grade bonds, in terms of pool of investors

A

Most financial institutions cannot hold sub-investment grade bonds

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54
Q

What party will there always be in bond issue - investment bank

A

Lead manager

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55
Q

Legal ownership of registered bond is transferred how

A

By registration

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56
Q

How are bonds bought and sold - method

A

Electronic exchanges

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57
Q

How do you sue I if T appointed

A

Through T

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58
Q

Two different kinds of bonds, which determine which Annexes apply for disclosure O in prospectus

A

Retail or wholesale

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59
Q

When will prospectus be used - what market

A

MM

60
Q

Who holds a global bond

A

Common depositary of all the clearing systems

61
Q

4 things that will make bond issue complete faster

A

Issuer experienced, bonds not listed, PVB and investment grade

62
Q

Who appoints T

A

Issuer

63
Q

What provision in FSMA states that if listing on PSM, LP required + must be approved by FCA

A

79 FSMA

64
Q

When is it likely that a bond issue will be guaranteed

A

If not investment grade

65
Q

What is the ‘Quoted Eurobond exemption’?

A

Allows interest to be paid gross to UK insurers

66
Q

How does T get its powers

A

Trust deed + CL

67
Q

Why does 85(2) not apply to PSM

A

PSM is not a regulated market

68
Q

What is included in Confirmation to Managers

A

Key terms of their commitment, e.g. who Ms are, UW terms, commercial terms

69
Q

What happens at the closing stage of issuing eurobond

A

Bonds + payment transferred

70
Q

What Annex is required for prospectus if issue if guaranteed

A

Annex VI

71
Q

What does a negative pledge for a bond usually say

A

New BHs to hold same rights

72
Q

What happens at launch of bond issue

A

Confirmation to Managers sent to co-Ms, and co-Ms then seek investors

73
Q

What is a retail offer of bonds

A

Minimum denomination is less than €100k

74
Q

Advantage of having FA for BH

A

Can sue I directly

75
Q

What does a bond’s credit rating show?

A

Risk

76
Q

What role does lead manager have

A

Adviser to issuer on issue procedure [+ listing if relevant]

77
Q

Why is FA NOT an option if secured bond

A

FA = I’s agent, and avoids clawback provisions in insolvency

78
Q

On what markets are bonds bought and sold

A

Debt capital

79
Q

What function does T NOT perform that FA does

A

T does NOT administer payments

80
Q

Roles of FA

A

Administering payment of interest + principal, as well as some admin functions

81
Q

What is the Subscription Agreement

A

Ms agree to be liable on J&S basis + covers issues e.g. CPs, price, R&Ws given by issuer

82
Q

Whose interests does ICMA represent

A

Investors

83
Q

What is the benefit of T being a single professional entity for issuer

A

Prevents multiple actions and more flexible

84
Q

What is par value

A

Value of the loan to be paid back

85
Q

Why is having T for complex/convertible bonds reassuring for BHs

A

T has investigative and monitoring powers

86
Q

Definition of eurocurrency

A

Currency held outside of country of origin

87
Q

Wh is a quasi-regulator of debt capital markets

A

ICMA

88
Q

Cons of bonds

A

Requires good credit rating, more public, more regulation, higher set-up costs, can be time-consuming, and less of relationship w/ BHs

89
Q

What two kinds of ‘Offering Doc’ can there be

A

Prospectus or Listing Particulars

90
Q

When can bonds be very quick to set up

A

Plain vanilla + for fee + unlisted - max week

91
Q

What is app to LSE when listing for

A

For Admission to Trading

92
Q

What is the Agreement among Ms

A

Deals w/ liability & Os between Ms, repeats J&S basis + how much each M subscribed for

93
Q

By when must Ms receive final draft of Subscription Agreement and Agreement among Ms

A

2 WD before signing

94
Q

Who acts as Fiscal Agent

A

Bank

95
Q

What is it called if bond has no repayment date

A

Perpetual bond

96
Q

Why are there higher set-up costs for bonds

A

More parties, docs and regulations to comply with

97
Q

Some pros of bonds over loans

A

Wider pool of investors, marketable, cheaper financing, more flexible, better for larger sums, longer maturity, can be v quick and tax exemptions

98
Q

Why do bonds generally have cheaper financing costs than loans

A

Spreading risk out + marketable + fixed rate = lower interest

99
Q

Once bonds are listed, what Os apply to issuer

A

Continuing Os

100
Q

When is FA more likely - what kind of bond

A

PVB, unless new issuer of bonds

101
Q

What provision allows application to FCA for exception to disclosure in prospectus if needed

A

PR 2.5.2R

102
Q

What is ‘coupon’

A

Interest

103
Q

Why is it faster for bond issue if not listing

A

No prospectus + no approval from LSE/FCA

104
Q

What LR does issuer listing bonds on PSM have to comply w/

A

LR 4

105
Q

Where is the reasonable investor test in statute

A

87A FSMA

106
Q

What provision states that prospectus must be approved before admission

A

85(2) FSMA + PR 3.1.10

107
Q

Two kinds of bonds, in regard to how legal ownership can be transferred

A

Bear and registered

108
Q

Starting position for disclosure Os in prospectus

A

87A FSMA

109
Q

What rating is considered speculative regarding B’s capacity to repay

A

BBB-

110
Q

Regulation on loans?

A

Very few if any regs apply

111
Q

Provision on content of prospectus

A

PR 2.3.1

112
Q

What Annexes apply in prospectus for retail bonds

A

Annex IV, V and XXII

113
Q

What is it called when a bond is represented in paper certificate form

A

Definitive bond

114
Q

What Annexes apply in prospectus for wholesale bonds

A

Annex IX and XIII

115
Q

What powers does T have

A

Wide powers to act on behalf of BHs, e.g. call EoD

116
Q

When is a deed of covenant required

A

No T + bonds in global form

117
Q

How does FA get its powers

A

FA Agreement

118
Q

What is the tax exemption applicable for bonds

A

‘Quoted Eurobond exemption’

119
Q

Why is PPA required if T used

A

T cannot administer payments

120
Q

Why does having T increase marketability

A

Increases confidence of BHs

121
Q

What is the max maturity for loans, generally

A

7 years

122
Q

Provision on format of prospectus (e.g. single or separate)

A

PR 2.2

123
Q

When is the closing stage of issuing eurobond

A

1/2 days after signing

124
Q

What is the MTN Programme

A

If large C issuing bonds frequently, agrees w/ bank for bank to manage future bond issues up to £X w/ a base prospectus

125
Q

What is a global bond

A

Represents total amount of bond

126
Q

Why is it costly to list bonds

A

Legal fees considerably higher + FCA and LSE both charge fee

127
Q

When is the bond repaid

A

At maturity

128
Q

Definition of eurobond

A

Either bond denominated in eurocurrency or domestic but sold internationally

129
Q

How long is prospectus valid for after approval + provision

A

12 months, PR 5.1.1

130
Q

Difference between coupon on bonds and interest on loans

A

More flexible for bonds, and usually fixed rate

131
Q

When might bonds be time-consuming to set up

A

If complex bond or listed

132
Q

How are bonds generally more flexible than loans

A

Not an absolute negative pledge and longer GP for non-payment

133
Q

Advantage of having FA for issuer

A

DoC owed to I, cheaper

134
Q

What two docs are signed during issue of eurobond process

A

Subscription Agreement and Agreement among Ms

135
Q

3 pros of listing bonds

A

Investor confidence, reach institutional investors and Quoted Eurobond exemption

136
Q

Who draws up Offering Doc

A

LM

137
Q

What provision outlines approval process for prospectus

A

PR 3.1

138
Q

Why do bonds offer wider pool of investors than loans

A

Not limited to banks + minimum denomination can be low

139
Q

What additional party will be required if T being used

A

Principal Paying Agent

140
Q

Two kinds of bonds (in terms of features)

A

Plain vanilla and convertible

141
Q

When is FA NOT an option

A

If secured bond

142
Q

What provision outlines docs to submit for approval of prospectus

A

PR 3.1.-1

143
Q

What is app to FCA when listing for

A

Admit to Official List

144
Q

Is the common depositary the legal owner of the global bond?

A

No - only the custodian

145
Q

First document signed between issuer and Managers when issuing bond

A

Confirmation to Managers

CF (11 decks)

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