Apunte Inglés
Universidad Universidad Pompeu Fabra (UPF)
Grado Administración y Dirección de Empresas - 4º curso
Asignatura Banking and Financial Institutions
Año del apunte 2017
Páginas 6
Fecha de subida 29/06/2017
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BANKING AND FINANCIAL INSTITUTIONS T-5. INVESTMENT BANKING A financial intermediary that performs large and complex financial transactions: Underwriting, assesing in a securities issuance process, facilitating mergers and other corporate reorganizations, project financing, … Assist Corporate Clients to raise money for: Acquiring Companies, Expansion , Developing New Products.
Tombstones: A tombstone is a type of print notice that is most often used in the financial industry to formally announce a particular transaction, such as an initial public offering or placement of stock of a company.
The Securities Act of 1933 required the publication of the tombstone advertisement to be printed in a newspaper and provide the barest of information on the transaction as the last step in the financial deal. This public disclosure is done in a form that lists the participants in a specified order according to their role in underwriting or brokering the transaction. The name of this disclosure comes from the appearance of advertisement used - Syndicated loan: A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several commercial or investment banks known as Arrangers. Arrangers serve the investment-banking role of raising investor money for an issuer in need of capital.
The issuer pays the Arranger a fee for this service, and this fee increases with the complexity and risk factors of the loan. In the Mid-1980’s when the larger buyouts needed bank financing, the syndicated loan market became the dominant way for issuers to tap banks and other institutional capital providers for loans.
1 - - Covenants: Leverage (Net Debt / EBITDA). Interest Cover (EBITDA / Net Interest).
Cashflow Cover (DSCR - Debt Service Coverage Ratio). Capital Expenditure (Capex).
*Newco’s EBITDA+ Affirmative covenants are clauses in debt contracts that require firms to maintain certain levels of capital or financial ratios. The most commonly violated restrictions in 2 - - - - - affirmative covenants are tangible net worth, working capital/short term liquidity, and debt service coverage.
Negative covenants are clauses in debt contracts that limit or prohibit corporate actions (e.g. sale of assets, payment of dividends) that could impair the position of creditors. Negative covenants may be continuous or incurrence-based. Violations of negative covenants are rare compared to violations of affirmative covenants.
With most debt (including corporate debt, mortgages and bank loans) a covenant is included in the debt contract which states that the total amount owed becomes immediately payable on the first instance of a default of payment. Generally, if the debtor defaults on any debt to the lender, a cross default covenant in the debt contract states that that particular debt is also in default.
In corporate finance, upon an uncured default, the holders of the debt will usually initiate proceedings (file a petition of involuntary bankruptcy) to foreclose on any collateral securing the debt. Even if the debt is not secured by collateral, debt holders may still sue for bankruptcy, to ensure that the corporation's assets are used to repay the debt.
Securities/Guarantees: Pledge over real estate assets (mortgages). Pledge or assignment of SPV and Target shares. Pledge or assignment of any receivables/credit rights arising from subordinated loans, claims, insurance indemnities, hedging agreement, banking accounts, … Guarantee of Target Company if legally possible (Refinancing Facility, RCF,…). Securities from Target Company where legally possible (Refinancing Facility, RCF, …) Undertaskings: - Authorisations and compliance with laws Pari passu ranking Negative pledge Restriction on merger Restriction on acquisitions Restriction on disposals Restriction on loans or credit Restriction on guarantees or indemnities Restriction on dividends and share redemption Restriction on financial indebtedness Restriction on issuance of share capital No change of business, shareholders or management Arm's length basis M&A: Providing assessment to seller or buyer . Fees for variety of services. Fairness opinion, Due Dilligence, Business Valuation, Target searching/analysis, … Pitching (People use the term “pitch book” for almost any type of PowerPoint presentation that you create in investment banking). Pitches can be: Market Overviews / Bank Introductions – Introducing the bank and giving updates to potential clients. (This is the simplest type of pitch book – it’s usually around 10-20 slides that introduce your bank and give an overview of recent market activity to “prove” that your bank knows what it’s talking about. Common elements: Slides showing your bank’s organization, the different departments, and how “global” you are. Several “tombstone” slides that show recent deals your bank has done in a particular sector. So if you’re presenting to Exxon Mobil, you might show recent energy M&A deals, IPOs, and debt offerings you have advised on. Along with these, you might create “league table” slides that show how your bank ranks in different areas like tech M&A deals, equity issuances, and so on. “Market overview” slides showing recent trends and deals in the market and data on how similar companies (“comps”) have been performing lately.) Deal Pitches – Sell3 side M&A, buy-side M&A, IPOs, debt issuances, and so on. Management Presentations – Pitching a client to investors once the bank has actually won the client.
- Leveraged buyout - Corporate restructuring Why? to improve on the terms and conditions of the existing debt (they maybe can’t afford to pay or they forecast difficulties), to pre-refinance maturing debt, to improve its liquidity position by extending the maturity of its existing debt; or to change the market for its debt.
Restructuring transaction stages Typically, a restructuring transaction is carried out in two stages: planning and implementation.
Planning The restructuring process is ready to begin as soon as the company advisers have been appointed.
Stabilization: During the initial stages of a transaction, priority is given to identifying and remedying key pressure points within the company, and reviewing existing debt agreements and other key contractual arrangements with investors. Once this process is complete, the preparation stage can commence.
Preparation: The business is reviewed and, if necessary, strategic and operational changes are suggested. The implementation of strategic and operational proposals is usually carried out by consultancy firms and industry experts, while understanding the security holders’ motivations remains the responsibility of the company advisers.
4 Once the results of the review are available, the company advisers can formulate restructuring plans and present their proposals, which, subject to the company’s approval, leads into the implementation of the restructuring proposals.
It is at this stage – after the restructuring proposals have been accepted by the company and prior to the launch of the restructuring – that the agent is engaged by the company or the company’s advisers. Its primary role is to act as a liaison between the securities clearing systems, the security holders (or clearing system participants), the company and its advisers, to facilitate prompt and accurate delivery of information throughout the transaction. To achieve that, the agent needs to ensure that the transaction documentation reflects the correct market procedures, and it therefore needs to negotiate and agree the participation procedures with the relevant clearing systems. These are categorised as either international central securities depositories (ICSDs) or central securities depositories (CSDs).
Implementation (This section refers to international transactions. Local market transaction stages may differ according to local market guidelines and targeted bondholder groups.) The implementation stage is divided into four phases: pre-offering, commencement of the offer, offer period and expiration/settlement of the offer.
Pre-offering: Prior to the restructuring becoming public, the transaction documentation is prepared (eg, transaction prospectus, newspaper notices, listing/delisting requests). The company works closely with its advisers, the appointed agent and legal counsel to ensure not only that the transaction documents reflect market procedures and restrictions, but also that they communicate clearly the company’s offer to the market. At this stage the agent also undertakes to pre-advise the relevant clearing systems of the forthcoming restructuring process. Negotiations will also start between the clearing systems and the agent to agree the content of the electronic notices to be sent to the security holders. Once the transaction documentation has been agreed, the offer is ready to commence.
Commencement of the offer: At the commencement of the transaction, to encourage participation, the agent coordinates the distribution of the offer documents to the security holders and/or the clearing systems.
Offer period: During the offer, the agent acts as a single information source for security holders regarding entitlement and participation procedures. It examines documents and instructions from the security holders, such as letters of transmittal, physical certificates, electronic blockings and guaranteed delivery instructions; checks for validity and correctness; and compiles the ‘participating holders’ list. Reports on participation levels and reconciliation progress are provided regularly, and can be designed to meet the specific needs of the company or its advisers.
Expiration/settlement of the offer: At the expiration of the offer, the agent performs the final reconciliation of the debt presented by the security holders in the restructuring. It confirms with the clearing systems that all the bonds have been blocked and that any physical deliveries of bonds have been processed.
When all the checks have been performed, the agent communicates the final position to the company’s advisers. Depending on the level of take-up and the terms of the restructuring, the 5 agent may be directed by the company’s advisers to scale back the restructuring by an agreed percentage. The agent calculates the positions to be accepted in the restructuring and those positions to be returned to their original holders. After the amount of the restructuring has been agreed, the agent liaises with the company’s advisers for the pricing information. Once the pricing has been confirmed, the agent calculates the individual consideration due to each security holder whose debt has been accepted in the restructuring and pre-advises the clearing systems of the relevant cash positions. The agent also arranges for the press releases announcing the results of the restructuring, together with the final pricing, to be distributed to the investors through the clearing systems or financial news providers (eg, Bloomberg, Reuters, WM Datenservice).
On the settlement date, the agent arranges for the payment of the individual considerations (new securities, cash or both) to the clearing systems.
Finally, the agent arranges for the cancellation of the restructured securities or their delivery to the company.
Other services an agent can provide in a restructuring transaction include the distribution of broker compensation (in certain markets), foreign exchange services for companies that maintain debt in a different currency to that of their country of incorporation, and escrow services for compulsory tender offers, schemes of arrangement or for funds received on preclosing.
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