![]() ![]() Bids by potential investors are then received on a set day and the company will then accept the relevant bids the following day. After this there will be a period of up to two weeks when the agent will respond to questions from potential investors with likely significant input from the company. The road show is usually attended by two senior officers and may include the finance director and group treasurer as well as the agent and can last two to four days. The OM and NPA are distributed to the potential investors upon launch of the transaction and typically followed up by a road show about a week later. The NPA includes the financial covenants, which will be determined in consultation with the agent before the transaction is launched. Legal counsel is appointed to draft the Note Purchase Agreement (NPA), the legal document that governs the issue and is reviewed by the agent and the company. The agent and the company then prepare the Offering Memorandum (OM) as well as a Road Show Presentation (if applicable), which serve as the primary marketing documents. The company will typically appoint one of its relationship banks to act as placement agent (agent). The whole process of issuing a USPP usually takes around 12 weeks from taking the initial decision internally to receiving the actual funds although the timetable can be shortened if necessary. The USPP market has proved to be resilient in recent years and was largely open throughout the period of financial turmoil in 2008/2009. One of the main attractions from an investor’s perspective is that USPPs usually come with covenants similar to those in a company’s bank credit facilities. Pricing is typically at a small premium to the public bond market, to reflect the private nature of the instrument, although there are companies for whom pricing is similar in both markets. The USPP market typically provides fixed rate US dollar debt in tranches of between three and 15 years though longer maturities are available for certain issuers. Currently total capacity for a strong investment grade company would be in the region of $2bn. Although this market is small in comparison to the public bond market, it is very flexible in terms of size of issue ranging from less than $100m to up to $1bn (under normal market conditions). There are around 50 active investors – mainly US insurance companies. The principal attraction of this market is that it provides an alternative source of liquidity from the traditional bank market without the need for a formal credit rating and reporting requirements that are a pre-requisite of the public bond markets. The US Private Placement (USPP) market is a US private bond market that is available to both US and non-US companies. 16 Swapping to floating rates and/or another currency. ![]()
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