Advanced Negotiation & Structuring Issues in High Yield Bonds
Redcliffe Training Associates Ltd.
Duration: 1 Day
£675
(excluding VAT)
Detailed information
| Type: | Seminars |
|---|---|
| Method: | In a classroom |
| Accreditation: | SRA CPD Hours: 6 |
| Prepares for: | This programme is aimed at those involved in providing a toolkit for both buy and sell side parties and their respective advisors. For the Issuers, the programme will inform their key concerns, namely; which Issuers can access the market, who are the typical investors & what motivates their investment criteria requirements and what are the key structuring/documentary issues which need to be negotiated between buyers and sellers which balance Issuer flexibility with Investor protection. For Investors, the programme provides a risk template to identify and mitigate the key risk areas of the deal; in particular which covenants matter most. |
Do you need further information?
Contact the person in charge , free and at no obligation, for information on how to enroll, enrollment limit/availability and more.
Course program
Course Overview:
High Yield Notes (Bonds) have become an increasingly important financing tool for borrowers in Europe since 2007 as traditional bank lending continues to contract in the face of Regulatory & other challenges. Notes have proved a flexible funding solution appearing in both Sponsored (Priory, Securitas Direct) and Sponsor-less (e.g. Heidelberg, Virgin, T Cook) deals and appearing across the capital structure in Senior and Junior form often in conjunction with Loans.
These developments have provided fresh challenges for both buy and sell-side; the evolution of these bi-furcated Loan / Note structures have introduced an additional dimension of complexity for both Issuers and Investors, which is invariably amplified in distress. Additionally, Notes’ reliance on Incurrence covenants, rather than maintenance covenants (BAA & Anglian being obvious exceptions) have proved challenging for investors more familiar with the covenant protection provided by Loans.
This programme is aimed at those involved in providing a toolkit for both buy and sell side parties and their respective advisors. For the Issuers, the programme will inform their key concerns, namely; which Issuers can access the market, who are the typical investors & what motivates their investment criteria requirements and what are the key structuring/documentary issues which need to be negotiated between buyers and sellers which balance Issuer flexibility with Investor protection. For Investors, the programme provides a risk template to identify and mitigate the key risk areas of the deal; in particular which covenants matter most.
During the programme, key issues will be illustrated with reference to extracts from Offering Memoranda and selected data from DebtXplained (the key provider of information to the European high yield community) will provide guidance on what is, and is not, market standard.
Course Content:
Summary of the key terms of High Yield Notes
High yield Funding spectrum; Senior Loans, Notes (senior & junior), Mezzanine, 2nd Lien & PIK
Types of Notes & coupons: Fixed & FRNs
Typical yields & maturities
Which Companies can access the market: market considerations Typical Debt capacity metrics
Issue size
Other market-related factors
Redemption terms & Change of control
Reporting requirements, Offering venue & Listing & Credit ratings
Jurisdiction: US vs problems in other jurisdictions (e.g. Thomas Cook)
Structures of Notes in the European market
Where are we now – 3 types of deal structures
How did we get here (some historical context) review of the evolution of high notes in Europe Type 1 – all Bond with super Senior RCF (e.g. Priory)
Type 2 –Senior RCF & Loan with (junior) Bond (e.g. Sunrise, Matalan)
Type 3 – pari passu Bond / Loan (Corporate) structure (e.g. Ladbrokes)
How Senior is Senior: Subordination what it is and why it matters (Thomas Cook)
A template for risk assessment
Review of Corporate and Financing Structure The Restricted Group – why and how it matters (q.v Bakkavor)
How/when can Restricted Subsidiaries become Unrestricted
Jurisdiction of Guarantors, Issuer, Borrowers
Impact on recovery in distress (q.v. Thomas Cook)
Use of proceeds
Subordination to other (Senior / existing) debt (Hapag)
Overview of the key areas of the Covenant package Limits on Debt: Ratio Debt Basket & Permitted Debt baskets
Security & Subordination (Liens)
Value Leakage
Limitations on Debt (Ratio Debt basket & the Permitted baskets)
Limitation on Debt / Ratio Debt Basket: key ratios & issues Fixed Charge Cover & Coverage ratio: Constituents & range
Which Group companies can use: (typical inclusions & exclusions, non-Guarantor subs)
Leverage & Secured Leverage ratio Constituents of the ratios and typical range in market
The various Permitted Debt (“Capped”) “baskets”
Summary of the various baskets (Liens, Collateral Liens, Restricted Payments, Permitted Investments)
Baskets & why they matter
Approach to “capping”
What to look for at the outset
Issues to watch EBITDA add-backs (summary)
Debt reclassification issues (q.v. Phones4u, Ontex, Kabel BW)
Other topical issues re the baskets “dumping”, “one-time” vs “revolving” baskets
Payment waterfall & Hedging issues
Maintenance covenants in High Yield Notes (e.g. BAA & Anglian Water)
Key Accounting definitions & impact on covenants
Definition of Indebtedness Typical exclusions: Operating Leases & related issues (Fixed or Frozen GAAP)
Unusual exclusions
Definition of EBITDA & related issues The 9 categories of add-backs: incidence
EBITDA add-backs per Management “discretion” vs. GAAP/IFRS compliance
Pro-forma adjustments in M&A The 5 categories
Management “good faith” test
Security, Liens, Guarantees & Subordination
The main issues Security package generally Topical issues: CoMI & Restructuring
Guarantees & issue of Non-Guarantors
Liens, Permitted Liens & Permitted Collateral Liens
What to look for at the outset
Issues to watch Refinancing debt issues
Liens: equal or rateable
Review Guarantor & non-guarantor issues
Value leakage:
Key issues: Restricted Payments: who & what is covered
Affiliates Transactions (sweetheart deals)
Permitted Investments
Other Asset Sales
What to look for at the outset Build-up basket
Carve-outs
Asset sale process
Sale & Leasebacks
Issues to watch Build-up basket issues (q.v. Eco-Bat)
Valuation issues (Fair Market Value)
Non-cash considerations
Payment waterfall (sales)
Call protection: Change of control & Equity Claw
The “historical” Change of Control (CoC) position The “portability” issue – the 3 variations on the standard CoC position
Topical cases: Ziggo, Odeon, Com Hem
Standard call protection (absent CoC)- Fixed vs FRNS
“Equity Claw” Investor issues
Issuer matter
Inter-creditor issues
Enforcement of security: Bondholders in instructing group, consultation
General issues (voting rights thresholds & Schaeffler the new trend)
Enforcement of security (Control and Appointment of the Agent)
Distressed sale post Enforcement Valuation issues
Management of proceeds
Standstills
Cross-default Bank’s position
Cross default vs cross acceleration
Treatment of prepayments Pro rata sharing, repayment of the Notes
Option to Purchase
Turnover clause
Amendments to Notes: Lender concerns
Amendments to Loan: Bank / Note-holder issues
High Yield Notes (Bonds) have become an increasingly important financing tool for borrowers in Europe since 2007 as traditional bank lending continues to contract in the face of Regulatory & other challenges. Notes have proved a flexible funding solution appearing in both Sponsored (Priory, Securitas Direct) and Sponsor-less (e.g. Heidelberg, Virgin, T Cook) deals and appearing across the capital structure in Senior and Junior form often in conjunction with Loans.
These developments have provided fresh challenges for both buy and sell-side; the evolution of these bi-furcated Loan / Note structures have introduced an additional dimension of complexity for both Issuers and Investors, which is invariably amplified in distress. Additionally, Notes’ reliance on Incurrence covenants, rather than maintenance covenants (BAA & Anglian being obvious exceptions) have proved challenging for investors more familiar with the covenant protection provided by Loans.
This programme is aimed at those involved in providing a toolkit for both buy and sell side parties and their respective advisors. For the Issuers, the programme will inform their key concerns, namely; which Issuers can access the market, who are the typical investors & what motivates their investment criteria requirements and what are the key structuring/documentary issues which need to be negotiated between buyers and sellers which balance Issuer flexibility with Investor protection. For Investors, the programme provides a risk template to identify and mitigate the key risk areas of the deal; in particular which covenants matter most.
During the programme, key issues will be illustrated with reference to extracts from Offering Memoranda and selected data from DebtXplained (the key provider of information to the European high yield community) will provide guidance on what is, and is not, market standard.
Course Content:
Summary of the key terms of High Yield Notes
High yield Funding spectrum; Senior Loans, Notes (senior & junior), Mezzanine, 2nd Lien & PIK
Types of Notes & coupons: Fixed & FRNs
Typical yields & maturities
Which Companies can access the market: market considerations Typical Debt capacity metrics
Issue size
Other market-related factors
Redemption terms & Change of control
Reporting requirements, Offering venue & Listing & Credit ratings
Jurisdiction: US vs problems in other jurisdictions (e.g. Thomas Cook)
Structures of Notes in the European market
Where are we now – 3 types of deal structures
How did we get here (some historical context) review of the evolution of high notes in Europe Type 1 – all Bond with super Senior RCF (e.g. Priory)
Type 2 –Senior RCF & Loan with (junior) Bond (e.g. Sunrise, Matalan)
Type 3 – pari passu Bond / Loan (Corporate) structure (e.g. Ladbrokes)
How Senior is Senior: Subordination what it is and why it matters (Thomas Cook)
A template for risk assessment
Review of Corporate and Financing Structure The Restricted Group – why and how it matters (q.v Bakkavor)
How/when can Restricted Subsidiaries become Unrestricted
Jurisdiction of Guarantors, Issuer, Borrowers
Impact on recovery in distress (q.v. Thomas Cook)
Use of proceeds
Subordination to other (Senior / existing) debt (Hapag)
Overview of the key areas of the Covenant package Limits on Debt: Ratio Debt Basket & Permitted Debt baskets
Security & Subordination (Liens)
Value Leakage
Limitations on Debt (Ratio Debt basket & the Permitted baskets)
Limitation on Debt / Ratio Debt Basket: key ratios & issues Fixed Charge Cover & Coverage ratio: Constituents & range
Which Group companies can use: (typical inclusions & exclusions, non-Guarantor subs)
Leverage & Secured Leverage ratio Constituents of the ratios and typical range in market
The various Permitted Debt (“Capped”) “baskets”
Summary of the various baskets (Liens, Collateral Liens, Restricted Payments, Permitted Investments)
Baskets & why they matter
Approach to “capping”
What to look for at the outset
Issues to watch EBITDA add-backs (summary)
Debt reclassification issues (q.v. Phones4u, Ontex, Kabel BW)
Other topical issues re the baskets “dumping”, “one-time” vs “revolving” baskets
Payment waterfall & Hedging issues
Maintenance covenants in High Yield Notes (e.g. BAA & Anglian Water)
Key Accounting definitions & impact on covenants
Definition of Indebtedness Typical exclusions: Operating Leases & related issues (Fixed or Frozen GAAP)
Unusual exclusions
Definition of EBITDA & related issues The 9 categories of add-backs: incidence
EBITDA add-backs per Management “discretion” vs. GAAP/IFRS compliance
Pro-forma adjustments in M&A The 5 categories
Management “good faith” test
Security, Liens, Guarantees & Subordination
The main issues Security package generally Topical issues: CoMI & Restructuring
Guarantees & issue of Non-Guarantors
Liens, Permitted Liens & Permitted Collateral Liens
What to look for at the outset
Issues to watch Refinancing debt issues
Liens: equal or rateable
Review Guarantor & non-guarantor issues
Value leakage:
Key issues: Restricted Payments: who & what is covered
Affiliates Transactions (sweetheart deals)
Permitted Investments
Other Asset Sales
What to look for at the outset Build-up basket
Carve-outs
Asset sale process
Sale & Leasebacks
Issues to watch Build-up basket issues (q.v. Eco-Bat)
Valuation issues (Fair Market Value)
Non-cash considerations
Payment waterfall (sales)
Call protection: Change of control & Equity Claw
The “historical” Change of Control (CoC) position The “portability” issue – the 3 variations on the standard CoC position
Topical cases: Ziggo, Odeon, Com Hem
Standard call protection (absent CoC)- Fixed vs FRNS
“Equity Claw” Investor issues
Issuer matter
Inter-creditor issues
Enforcement of security: Bondholders in instructing group, consultation
General issues (voting rights thresholds & Schaeffler the new trend)
Enforcement of security (Control and Appointment of the Agent)
Distressed sale post Enforcement Valuation issues
Management of proceeds
Standstills
Cross-default Bank’s position
Cross default vs cross acceleration
Treatment of prepayments Pro rata sharing, repayment of the Notes
Option to Purchase
Turnover clause
Amendments to Notes: Lender concerns
Amendments to Loan: Bank / Note-holder issues
Do you need clarification regarding the course program?
Contact the person in charge , free and at no obligation, for information on how to enroll, enrollment limit/availability and more.
Course location
- Oct18from 18 October 2013 to 18 October 2013