Brief Procedure in Eurobonds Issues

Companies wishing to raise a substantial amount for a fixed maturity in one go have the choice of issuing a bond on a stand-alone basis or under an MTN programme. Such an issue may be syndicated among a group of banks, or privately placed. In order to ensure that the offer does not constitute an “offer of securities to the public” in the UK, offers are usually restricted to certain classes of market professionals or denominated in amounts of €100,000 (or equivalent in other currencies) or greater.

An issue may be listed on – or, to use the terminology from the Prospectus Directive, admitted to trading on – a stock exchange (e.g. in London, Luxembourg or Ireland). In order to obtain a listing, listing particulars or a prospectus describing the issuer and the terms of the issue must be produced in compliance with the listing rules of the relevant exchange or listing authority.

For a UK company, a listing by a recognised stock exchange or listing authority will be necessary to take advantage of an exemption from UK withholding tax, so that investors can receive interest payments free from UK withholding tax.

A Eurobond issue is arranged as follows:

• The borrower will appoint a bank to manage the bond issue.
• This managing Bank will probably be a .merchant bank or an investment bank.
• This managing bank invites one or more other banks or financial institutions to co- manage the issue.
• The managing banks try to ensure the success of the bond issue by inviting a group of banks and other financial institutions to underwrite the issue.
• Once the issue is underwritten, the managing banks will try to place the issue with a number of selling banks and other financial institutions.
• The selling banks will in turn try to place all or some of their allotment with clients. The ‘Placing Power’ of the selling banks will be a vital factor in the successful launch of a new issue, i.e., it is crucial that the selling banks should be able to place the bonds with buyers. To help the selling process, a ‘Prospectus’ will be issued giving information about the terms and conditions of the bond, the name and details of the issuer, the purpose of the loan and selling information.
• Eurobond issues in the UK are usually constituted under a trust deed. The bank which is responsible for making payments to the bondholders will act as their trustee