INTRODUCTION

Debt capital market (“DCM”) lawyers help a company raise funds through the issuance of debt securities to the public or investors. Debt securities, such as bonds, notes, or other forms of debentures, are a type of financial asset issued by corporations and sold to investors for money in exchange for fixed, periodic payments of interest and eventually the principal sum on maturity. Prior to maturity, the investor can also sell the bond in the open market, with the bond’s current value often dependent on the market’s perception of the creditworthiness of the issuer.

Debt securities are attractive for numerous reasons. For companies, in contrast to a bilateral or syndicated bank loan, issuing debt securities allow companies to raise large sums of money on less restrictive terms as compared to what banks usually impose on borrowers. For investors, rather than purchasing equity investments in which the return earned is dependent on the market performance of the equity issuer, purchasing debt securities provide a fixed stream of returns in the form of regular interest or coupon payments, dependent on the specific type and terms of the bond between the issuer and the investor (underwriter).

DCM transactions can be on a standalone basis or under an existing established debt issuance programme, and notable examples include medium term note programmes, convertible and exchangeable bonds, fixed and floating rate notes, loan participation notes, variable funding notes, project finance bonds, investment-grade bonds and high-yield bonds.

WHAT YOU CAN EXPECT

• You will provide legal advice to a particular party within the DCM deal, such as the issuer, underwriter, trustee or agents. When working with an issuer, you may advise on the manner in which the debt transaction should be structured (including its maturity, currency, payment frequency etc), assist with preparing the types of disclosures to be included in the Offering Circular, as well as ensure compliance with securities laws and regulations. You can also expect to work closely with other professionals such as auditors, regulators and clearing systems.
• The key document you will be working on is the Offering Circular. This document provides investors with an understanding of the issuer company’s business, its corporate history, its directors and key management, and the company’s financial performance, so as to allow them to make an informed investment decision. The Offering Circular highlights the risks involved in purchasing a particular company’s bonds.
• In this process, you may also carry out Due Diligence on the issuer to identify any material liabilities (such as litigation, claims, or losses etc) that will be required to be disclosed to investors. This requires a detailed understanding of an issuer’s business and its creditworthiness which can be obtained from reviewing material agreements, conducting interviews with key management of the company, as well as with the auditors.
• You may be involved in preparation of the Underwriting / Subscription / Purchase Agreement between the issuer and its investment banks. This relates to underwriting and/or subscription of the debt securities by the banks.
• You may also be working on the Terms and Conditions / Description of the Notes, which sets out key terms such as the amount of interest payments, payment frequencies, maturity date, type of securities, any redemption / purchase events that allow for early redemption of the debt securities, events of default etc.
• Other contractual documents may include the Trust Deed (where the issuing company appoints a trustee to act on the investors’ behalf), or a Fiscal Agency Agreement (where the issuing company appoints a fiscal agent to carry out the payment and other administrative functions).
• You may be required to advise the issuer on regulatory and compliance matters, including any securities regulations in Singapore or elsewhere, as well as the Singapore Exchange Securities Trading Limited (the “SGX”) if the issuer lists its debt securities on the SGX. Other regulatory matters include restrictions on offering and selling debt securities and listing requirements for bonds and notes, which may be found in the Securities and Futures Act.
• Towards the end of the transaction, you will assist with closing. This involves coordinating with the other parties to ensure that all conditions precedent are met and that transfer of funds and crediting of securities can be completed smoothly.
• While each law firm and team operates differently, a junior lawyer may take on more responsibility preparing certain transaction documents (e.g. the subscription or purchase agreement, trust deed, agency agreement, the ancillary pricing and closing certificates and checklists) while also assisting with the initial drafts of the offering circular. Junior lawyers will also take on the coordination work involved in the closing exercise. Senior lawyers maintain supervisory oversight of the deal and ensure that key terms and risk disclosure points are included in the Offering Circular.