International Capital Market Association ICMA

Transcription

1 International Capital Market Association ICMA

2 The ICMA Primary Market Handbook Ruari Ewing, Senior Director, ICMA 12 March 2015

3 Background IPMA history International Primary Market Association (IPMA) formed in 1984 Independent trade association for leading underwriters of international issues of debt (and equity to an extent) Main organisation covering new issue procedure for Eurobonds Harmonisation / establishment of good practice based on consensus of the major securities houses Neither an exchange nor a regulator: recommendations, not rules (and no power to sanction) Parties can disapply [when?], but otherwise presumed to be observed

4 Background IPMA to ICMA IPMA merged with the International Securities Market Association in 2005 ISMA was a trade association and self-regulatory body for the secondary markets (successor to the AIBD) since the 1960 s Merger created the International Capital Market Association (ICMA) ICMA full members include global investment banks and smaller regional banks and securities houses and its associate members include exchanges, central banks and more recently institutional investors, borrowers and law firms so issuers, intermediaries, investors and service providers The IPMA philosophy now applies to ICMA s primary market activities

5 Background ICMA work Development and maintenance of high standards of market practice (inc. documentation) Fostering appropriate levels of regulation and assisting market understanding Educating market participants and others through training and research ICMA Centre, University of Reading Facilitating communication (inc. between functions: business, legal, compliance) and establishing information forums and other events ICMA Market Practice & Regulatory Policy department: a dozen or so staff in London; three in Hong Kong Current focus: post-crisis initiatives (CRD, Basle, CRAs, sovereign debt), post trade transparency, secondary liquidity, FSAP Directive reviews, CMU, FEMR, green bonds, private placements, supporting NAFMII s work in mainland China...

6 ICMA documentation ICMA newsletter ( Quarterly Report ) ICMA Primary Market Handbook - Primary markets Primary Market Practices Committee Legal & Documentation Committee ICMA (ex-isma) Rulebook - Secondary markets Secondary Market Practices Committee Global Master Repurchase Agreement (GMRA) & related legal opinions - Repo markets European Repo Council & Committee Ad-hoc publications Japanese withholding tax 1998 and 2000, Retail cascades, NGN documentation, senior and negative pledge covenants, AMTE buyback recommendation, UK 2004 allocations

7 Handbook - introduction Launched in 1985 as the IPMA Handbook with just a few short pages covering the issuance of straight Eurobonds; Now also covering debt programmes, CP and (though scheduled to be withdrawn) some equity A live document, continuously responding to market developments committee / working group discussions, competition law review, formal approval, publication (and always something to review) ad hoc form so far (but format is changing) Not exhaustive: neither prohibited, nor mandated; neither obvious, nor beyond consensus. Normative rather than formative. Also (so far) influenced by the European regulatory context Maintains market practice standards + helps transparency of the relationship between lead manager(s) and other syndicate members; NOT aimed at protecting other market parties, solving market imbalances or (generally) regulatory gaps Basis for in-house procedures and precedents Key themes: transparency, fair play, timeliness, efficiency, standardisation Legitimate expectation of default issue execution (and basis for reasonable reproach otherwise) Rebranded in 2012 as the ICMA Primary Market Handbook and scheduled recast in 2015H1

8 Handbook - access Hard copy Free allowance for ICMA members Otherwise paying subscription: initial purchase and annual update service (discounted for members) Glossy updates distributed by post on an irregular basis (PDFs alerts in meantime) Onus on recipients to ensure update reception (inc. registration with update service) On-line at Free to members Otherwise paying subscription Most recent updates free to view Updated same day as PDF alerts dispatched HTML / PDF mix Archive Member / subscriber log-in username & password

9 Handbook - content type Recommendations Some set out what is good practice; others that whatever practice followed be disclosed; and others even that proposed practice be agreed or just discussed. Other front end items/provisions Currently explicitly differentiated. Guidance Notes Address topics of interest or concern to the primary markets and suggest potentially helpful approaches for consideration Explanatory Notes / Notices These are explanatory only and do not purport to offer guidance to market participants (e.g. EN XII on the pot system, EN XIII on bookbuilding and allocations) In future status will be implicit from the text. (Sliding scale form vs content) Standard Forms and Language Provide valuable formats for key primary documentation (e.g. Agreement Among Managers, forms of final terms)

10 Handbook - application scope Recommendations Apply to ICMA members acting as lead managers International Issues Syndicated Lead-managed by one or more ICMA members With cross border distribution Unless stated to the contrary Opt out (forthcoming refinement for domestic issues in the international markets) Some exceptions Currently including e.g. US$ globals (domestic issues in the international markets?) Read introductory general notes to each of sections 1, 2 and 4 (current) or Chapter 1 on scope (new Handbook) In future: US$ globals (bar one item), high yield, equity-linked (bar AAM version 2) Read Chapter 1 on scope Also Opt in potential Non-Recommendation items scope variable

11 Handbook - users For application Bank syndicate desks and/or related compliance officers on business / conduct aspects etc., e.g. payment of banks fees, allotment, desk invitations, stabilisation (aside from the prospectus legend) Bank lawyers (in-house) e.g. relationship clarifications (dealers vs arranger), invitation telexes, agreement among managers Bank lawyers (in-house and external counsel) final terms, status of lead-counsel to managers, timely document circulation For information Issuers (e.g. matching bonds and back-to-back swaps), Investors (e.g. on bookbuilding and allocation), clearing systems (final terms) and others (regulators, auditors, paying agents...)

12 Handbook - Euromarkets (institutional) deal flow context 1. Programme establishment / update 2. Investor meetings (if needed) 3. [Mandate] 4. [Pre-sounding (if needed)] 5. Announcement e.g. Shell 5-year benchmark ( mandated ) [+ desk invitation] + Red herring / supplement publication (if needed) 6. Roadshow (if needed) 7. Initial price thoughts (if needed) 8. Spread guidance ( bps ) and opening of order book (could be folded into announcement ) 9. Revised guidance (if needed) 10. Closing of order book 11. Launch 1bn at 170bps (definitive size and spread, inc. any new issue premium) 12. Allocation (overallotment if needed*) 13. Pricing 99.7% (round 1/8 coupon) [+ invitation telex] 14. Leads free to trade * 15. [Signing subscription agreement] and prospectus / final terms publication 16. Closing release of funds vs. global note 17. Settlement accounts credited in clearing systems DVP *Stabilisation purchases might begin if needed at any time from free to trade

13 Handbook - section breakdown (current) Recommendations Section 1 Debt issues (33-2 = 31) (and one general note) Section 2 Equity + equity-linked debt (6 + 2 schedule check-lists) (and one general note) [N.B. Pure equity to be deleted and equity-linked provisionally limited to AAM] Section 3 Just equity-linked debt (i.e. convertibles) (1) Section 4 Debt programmes (8 + 5 guidance notes) (and one general note) Section 5 ECP (one) Other materials Section 6 Appendices : 1 check-list + 11 related explanatory notes + 2 unrelated explanatory notes Section 7 Standard documentation / language (11 items) Section 8 Guidance notes (20 8 = 12) + press statements (3) Skim the index!

14 Handbook standard documentation & language (current) 7.Std.I Agreement among managers (joint & several) (under review) 7.Std.II Final terms / pricing supplement (minor UKLA-related amendments) 7.Std.III Actual/Actual ICMA day count fraction 7.Std.IV EU Savings Directive gross-up (and related guidance) 7.Std.V Contracts (rights of third parties) Act Std.VI Auditor arrangement and comfort letters 7.Std.VII deleted 7.Std.VIII Sovereign CAC clauses 7.Std.IX Selling restrictions: (a) debt, (b) (deleted) equity 7.Std.X ECP documentation (Dealer Agreement, Infomemo, global note) (under review) 7.Std.XI MAD safe harbour legends & notices (under review) See also: 1.R.5 and 2.R.2 (PoA), 1.R.15 (director s certificate), 4.GN.4 (ratings disclosure under review), 4.GN.5 (board issuance approval), 6B.EN.VI (tax redemption), 6B.EN.IX (force majeure), 8.GN.20 (PD exempt vs non-ex), non-handbook retail cascade note (prospectus legend) (under review)

15 Handbook - section breakdown (future) Front end Chapters (18 pages) Ch.1 Scope Ch.2 Programme establishments and updates Ch.3 Prior to transaction announcement Ch.4 Transaction announcement Ch.5 Bookbuilding and launch Ch.6 Allocation and allotment Ch.7 Pricing Ch.8 Confirmation to Managers Ch.9 Stabilisation Ch.10 Issue documentation and signing Ch.11 Closing and settlement Ch.12 Euro commercial paper Back end Appendices (155 pages) A1 Agents and ICSDs A2 Agreement Among Managers (versions 1 and 2) A3 Auditor letters A4 Calculation agency role regarding certain derivative-linked securities A5 Credit ratings in programme offer documents A6 Day count fraction: ICMA Actual/Actual A7 Domestic market customs A8 ECP documentation A9 Force majeure A10 New safekeeping structure (NSS) for ICSDcleared registered bonds A11 Pre-sounding, bookbuilding and allocations A12 Pricing supplement and final terms A13 Selling restrictions (UK & EEA Prospectus Directive) A14 Sovereign bonds (information covenants and collective action clauses) A15 Stabilisation materials A16 Sub- 100,000 denomination bonds in the EEA and retail cascade legends A17 Withholding tax and EU Savings Tax Directive B1 Reader s guide B2 Glossary Index

16 Handbook general themes (current) Organising syndicate banks allotments, fee payments, pot system... Improving disclosure desk invitations (and invitation telex), updating base prospectus, provision of draft & final documentation, standard form final terms N.B. intra-syndicate vs. public disclosure Explaining new and existing market practices Pot system, calculation agency (and backto-back swaps), 50+1 denominations (8.GN.18), NSS ( New Safekeeping Structure ) for registered notes (8.GN.19), pre-sounding, bookbuilding and allocations (6B.EN.XIII) Interpreting and applying regulation Withholding tax (7.Std.IV), selling restrictions (7.Std.IX) (ECM?), stabilisation safe harbour (1.R.25, 7.Std.11) (under review), PD exempt vs non-exempt offers (8.GN.20) Standardising legal documentation day count fraction (1.R.19), Force majeure (6B.EN.IX), Agreement among managers (7.Std.I), auditor comfort letters (7.Std.VI), ECP documentation suite (7.Std.X) More than one theme possible

17 Handbook specific themes 1 Note: Themes may well split across various Handbook items (historical legacy) Early disclosure of terms desk invitation (1.R.1 and 6.App.A, also e.g. 1.Rs.3, 8, 13, 17, 20, 21, 23 and 24 and 2.R.1, 2.S.1 and 2.S.2), invitation telex (6.App.B guarantees, ratings, ranking, negative pledge, call options, tax, selling restrictions, force majeure, cross-default, expenses), pricing and breaking of syndicate (1.R.22), date of base prospectus (1.R.26) Timely provision of documents (draft or final) 1.R.5, 1.R.10, 1.R.21(B.2), 1.R.27, 1.R.28, 2.R.2, 4.R.1, 4.R.3 (conference call preparation), 4.R.4 (notifying arrangers of other dealer programme updates), 4.R.6, 4.R.7, 4.GN.1 (importance of up to date disclosure), 4.GN.2 (reverse enquiries), prospectus link (1.R.32) Relationship clarifications 1.R.18 (law firms), 1.R.29 (LMs vs Co-Ms), 4.R.5 and 4.R.8 (arranger vs dealers) Conditions precedent 1.R R.4, 4.R.2, 4.GN.3 Exceptions global deals with US distribution (1.R.21), international offers of domestic securities (1.R.24)

18 Handbook specific themes 2 Clearing systems & agents enforceability (1.R.16), delivery of documents (8.GN.8), minimum denominations (8.GN.18) (To be deleted), New Safekeeping Structure (8.GN.19) Globals & definitives printing & delivery of definitives (8.GN.1 and 1.R.10), definitive & temporary/permanent global status & wholesale conversion (8.PS.2) Day-count fractions 1.R.19 and 7.Std.III Ratings 4.GN.4 (under review), 6B.EN.II Taxation 6.App.A, 6B.EN.VI, 7.Std.IV Sovereign issues CAC clauses (1.R.23 and 7.Std.VIII), GBP redemption yield (8.GN.15), information covenants (8.GN.16) ECP Section 5 (just 5.R.1) and 7.Std.X (under review) Programmes drawdowns (1.R.14 and 1.R.26) and establishments/updates (Section 4) Force majeure 6B.EN.IX and 8.GN.2

19 Handbook specific themes 3 Orderbooks passive bookrunner access (1.R.31), book disclosure (EN XIII), co-manager placed orders (2.R.6), new issue processes (1.R.32) Pre-sounding 1.R.30 Distribution 1.R1(#5), 1.R.32, 8.PS.1 Allotments, selling groups and underwriting participations 1.Rs.2-4 & Stabilisation Coordinating stabilising manager structure, disclosure and standard language (1.R.7, 1.R. 8 (part), 1.R.24, 1.R.25/3.R.1, 2.R.5 and 7.Std.XI) (under review) Fees and expenses 1.R.8, 1.R.9, 1.R.20(#4), 2.R.3, 6B.EN.XI Pot deals and name give-up 1.R.17, 1.R.20 Fungibles Only after closing of original deal (1.R.12) and scope thereof (8.GN.3) Limitation on issuer payment obligations 8.GN.5 Calculation agency and back-to-back swaps 8.GN.17 PD exempt vs non-exempt offers 8.GN.20 Market conventions for the euro 8.PS.3 Sterling price references 1.R.33

20 Handbook Recast 2015 Full root & branch review, with publication intended for 2015H1 (pre-agm?) Mainly cosmetic re-organisation into user-friendly / streamlined chapters and appendices; addition of a glossary and reader s guide; consolidation of scope provisions; also allowing for more discrete future amendment (right hand annotations) But a few conceptual developments: Invitation telex Confirmation to Managers (no acceptance concept) Follows Initial Syndicate Communication (information a prospective manager would reasonably expect to be informed of prior to their names being publicly associated with the transaction and prior to pricing) Also some Spring cleaning : Deletions Some provisions relating to retention deals; Equity selling restrictions; Minimum denominations; Force Majeure Version 1 Updates ECP documentation; ratings disclosure language; stabilisation materials; retail cascade language; [AAM version 1 (stab cap / Joint & several)?]; final terms (UKLA); sovereign CACs A table of destinations will accompany publication of the new Handbook. ICMA staff will field questions (see later) and further briefing sessions are likely to be organised.

21 ICMA Rulebook - scope Scope Online only Statutes & Byelaws - structure of ICMA itself, membership procedures and internal governance Rules & Recommendations self-regulatory code on trading and settlement automatically apply to trading between ICMA members in international securities (as defined), unless (with some exceptions) otherwise agreed ( opt out ) non-icma members can elect to submit dealings ( opt-in ) bilateral contractual effect (c.f. potential for ICMA enforcement) Content Terms for the correct settlement of bonds and what constitutes good delivery Buy-in and sell-out procedures if problems in settling transactions Arbitration and conciliation procedures Standard method of yield calculation based on annual compounding

22 International Repo - GMRA Standard master agreement for repo transactions: Global Master Repurchase Agreement 1995, 2000 and 2011 (and guidance notes) Annual updated opinions for 60+ jurisdictions general validity, netting enforceability, re-characterisation risk (some jurisdictional variance) Combined in most jurisdictions with opinions on OSLA 1994 & 1995, GESLA 1996, GMSLA 2000 and GMSLA 2010: core opinion covering all agreements, specific appendix covering the GMRA and (not available from ICMA) specific appendix covering the other agreements

23 ICMA staff contacts ICMA Legal & Regulatory Helpdesk Telephone: (London) / (Zurich) / (Hong Kong) legalhelpdesk@icmagroup.org (legal enquiries) / regulatoryhelpdesk@icmagroup.org (market practice and regulatory policy queries) Staff finder See Contacts box at Market-Practice/ Primary markets generally (inc. ICMA Primary Market Handbook) Ruari Ewing: / ruari.ewing@icmagroup.org Charlotte Bellamy: / charlotte.bellamy@icmagroup.org GMRA / ICMA Rulebook Lisa Cleary (London) / Andre Seiler (Zurich) ICMA representative office in Hong Kong (Mushtaq Kapasi, Ricco Zhang and Christina Siu)

24 Thank you Any further questions?