1、ISSUE 18/APRIL 2020 Finance and Markets Global Insight COVID-19 and European Collateralized Loan Obligations challengesandopportunities COVID-19 and primary markets considerations for issuers ofsecurities Bank of England Covid corporate financing facility COVID-19 and Fund Finance considerations for

2、FundManagers COVID-19 and its impact on the financial services sector COVID-19 Liability management and key considerations for debt issuers 2 FINANCE AND MARKETS GLOBAL INSIGHT Contents Foreword 3 COVID-19 and European Collateralized Loan Obligations challenges andopportunities 4 COVID-19 and primar

3、y markets considerations for issuers ofsecurities 6 Bank of England Covid corporate financing facility 8 COVID-19 and Fund Finance considerations for Fund Managers 10 COVID-19 and its impact on the financial services sector 12 COVID-19 liability management and key considerations for debt issuers 14

4、The road ahead for digital finance 16 Tackling the NPL mountain 20 Investment fund liquidity plugging the leaks 22 France introduces an innovative legal framework for digital assets 24 The demise of LIBOR: Is it an issue for Islamic banking? 26 FCA feedback statement on climate change and green fina

5、nce 28 3 WWW.DLAPIPER.COM Foreword Martin Bartlam Partner, International Head of Finance, Projects makealleffortstomeettheirregulatoryand other obligations in a timely manner, despite any operational obstacles they may be facing even thoughcertaindelayswithregardstofinancial reporting will be permit

6、ted; and seek advice and/or speak to their regulator where they deem they are unable to comply with their obligations. ESMA recommendations On 11 March, the European Securities and Markets Authority (ESMA) published its statement outlining how market participants should act in light of the coronavir

7、us outbreak. Among other things, ESMA recommends that issuers should do the following: Market disclosure issuers should disclose as soon aspossibleanysignificantinformationconcerning COVID-19thatmayaffecttheirfundamentals, prospectsorfinancialsituation,inaccordancewith their transparency obligations

8、 under the Market Abuse Regulation (MAR). Financial reporting issuers should disclose in their2019year-endfinancialreportsorifthese havealreadybeenfinalisedintheirinterimfinancial reporting disclosures, actual and potential impacts of COVID-19ontheirbusiness,financialsituationand economic performanc

9、e. However, ESMA recognises thatissuersmayfacedifficultiesinsubmitting theirfinancialreportsontime.Tothisend,inits subsequent statement of 27 March 2020, ESMA recommended that national competent authorities should not take supervisory action against issuers who are unable to meet the upcoming report

10、ing deadlines under the Transparency Directive, for a periodoftwomonthsforannualfinancialreports andofonemonthforhalf-yearlyfinancialreports. However, ESMA expects issuers to inform their national competent authority and the markets of the delay, the reasons for such delay and the estimated publicat

11、ion date to the extent it is feasible. Inaddition,toassistfinancialreporting,ESMAhas issued guidance on the accounting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with the International Financial Reporting Standard 9 (IFRS 9). FCA guidance On 17 M

12、arch, the UK Financial Conduct Authority (FCA) published the 27th edition of its Primary Market Bulletin, which includes a commentary for issuers of securities and coronavirus. The main points are the following: Ongoing disclosure under MAR The FCA expects issuerstomakeeveryefforttoremaincompliantwi

13、th their regulatory obligations under MAR and the FCA rules. Given the circumstances, however, it may be challenging for disclosure committees to convene and operate as usual. The FCA is conscious that, at least at the beginning, there may be slight delays as new processes are being implemented, but

14、 in general expects issuers to meet their obligation in a timely fashion. According to the FCA, issuers operational response to COVID-19 may itself meet the disclosure requirements under MAR. In brief. As the coronavirus COVID-19 outbreak develops intoafull-scalepandemic,financialmarkets participant

15、smayfinditchallengingtomeettheir regulatory and other obligations in a timely fashion. Inanefforttomitigatetheimpactofcoronaviruson theorderlyfunctioningofcapitalmarkets,financial services regulators in the UK and the EU have issued relevant guidance for issuers of securities. 1. Regulation (EU) 596

16、/2014 2. Directive 2013/50/EU 7 WWW.DLAPIPER.COM Transaction notifications Persons discharging managerial responsibilities (PDMR) and closely associated persons are also expected to comply with theirnotificationrequirementsunderMARwithinthe required timeframes. Shareholder meetings Issuers must ensu

17、re that shareholders can exercise their rights, for instance in the Annual General Meeting, using virtual methods. Corporate transactions The FCA will continue to review documentation for corporate transactions in accordance with its established principles. If a transaction is urgent, issuers are ad

18、vised to engage,inthefirstinstance,withtheirrelevant sponsorfirmoradviser. With regards to corporate reporting, the FCA will grant a temporary relief by giving listed companies an additionaltwomonthstopublishtheirauditedfinancial statements. This means that issuers may publish theirfinancialstatemen

19、tswithinsixmonthsoftheir year-end, instead of four months, as required under the Transparency Directive. At the same time, the FCA strongly recommends that listed companies revise all elementsoftheirtimetablesforpublicationoffinancial information to ensure accurate and carefully prepared disclosures

20、. However, this temporary relief does not affectissuersdisclosureobligations(andtimingfor these) under MAR. The Financial Reporting Council (FRC) and Prudential Regulation Authority (PRA) have also issued useful guidanceforcompaniespreparingfinancial statements in the current circumstances. Authors

21、Marina Troullinou Associate T +44 20 7153 7797 Ronan Mellon Partner T +44 20 7796 6770 8 FINANCE AND MARKETS GLOBAL INSIGHT Bank of England Covid corporate financing facility It is striking that large sub-investment grade businesses were not directly provided for in this package with no meaningful p

22、rovision for businesses that would typically access the high yield or sub-investment grade capital markets, leaving them to rely on continued support from equity holders and commercial lenders. What is the Covid Corporate Financing Facility? Liquidity support for large investment grade businesses wi

23、ll be provided by the Covid Corporate Financing Facility Limited (CCFF) operated by the Bank of England (BOE) on behalf of HM Treasury. TheCCFFwillprovidefinancetobusinessesacrossa range of sectors by purchasing Commercial Paper with an initial term of up to 12 months. The CCFF scheme itself will op

24、erate for at least 12 months and “for as long asstepsareneededtorelievecashflowpressures”. The BOE will provide 6 months notice of the withdrawal of the CCFF. The Fund will purchase Commercial Paper in sterling duringadefinedperiodeachbusinessday.TheFund will purchase, at a spread based on pre-Covid

25、 spreads over the current sterling overnight index swap rate , newly issued Commercial Paper in the primary market and after issuance from eligible counterparties in the secondary market. Further details on the Bank of Englands Covid Corporate FinancingFundforinvestmentgradenon-financial issuers wer

26、e announced on Monday 23 March. The banks that were approved to act as dealers are the following: Barclays, HSBC, Lloyds Banking Group, Natwest, Bank of America, Citi, Goldman Sachs, JP Morgan, Morgan Stanley and Standard Chartered. Contacts have been provided for all except, at the time of writing

27、this, Standard Chartered and are available here. Who can apply? The funding will be available to: 1.non-financialcompanieswhomakeamaterial contribution to the UK economy; and 2.thathad,priortobeingaffectedbyCOVID-19,ashort orlongtermratingofinvestmentgrade,orfinancial health equivalent to an investm

28、ent grade rating. It is therefore a requirement that companies accessing the CCFF make a material contribution to the UK economy. This test is explained as follows: “In practice, firms that meet this requirement would normally be: UK incorporated companies, including those with foreign-incorporated

29、parents and with a genuine business in the UK; companies with significant employment in the UK; firms with their headquarters in the UK. We will also consider whether the company generates significant revenues in the UK, serves a large number of customers in the UK or has a number of operating sites

30、 in the UK.” Companies that do not currently issue Commercial Paper but are capable of doing so will in principle be eligible to utilise the facility provided that they meet the eligible securities criteria. Issuers must have a minimum short term credit rating of A-3/P-3/F-3/R3 or above or a long-te

31、rm rating of BBB-/Baa3/BBB-/BBB low or above from at least one of Standard theCovidCorporateFinancingFacility for larger investment grade businesses; and the Coronavirus Business Interruption Loan Scheme for smaller businesses with turnover under GBP45 million per annum. It also included business ra

32、tes relief for retail, hospitality and leisure businesses and grants for small business and businesses in the retail, hospitality and leisure sector. 9 WWW.DLAPIPER.COM of whether the BoE can assess that the issuer is of equivalentfinancialstrength.Thisratingorequivalent requirement means that acces

33、s to the facility will not be available to sub-investment grade issuers and hence not available to leveraged loan and high yield issuers. Such companies must be “fundamentally strong” but be experiencing short-term funding pressures caused by the current economic conditions. As yet, there is no guid

34、ance on how this can be demonstrated as part of the application process. However, we would suggest that companies interested in the CCFF get a clear view (as far as possible) on liquidity requirements so that they are able to make an appropriate and measured request for funding. On the eligibility c

35、riteria for companies that do not have a credit rating, the guidance is to contact one of the major credit rating agencies to seek an assessment of credit quality in a form that can be shared with the Bank of England and HM Treasury, noting that the company is doing so to use the CCFF. Here they env

36、isage, in addition to public credit ratings, accepting the following (for those approachingcreditratingagenciesforthefirsttime): from Moodys Investor Services: (Private) Indicative ratings at a recent point-in-time from Standard and to maintain the stock of sterling non- financialinvestment-gradecor

37、poratebondpurchases at GBP10 billion and the stock of UK government bond purchases at GBP435 billion. Last, the Financial Conduct Authority announced on 17 March its plans to postpone certain regulatory activity, to extend the date for responses to its open consultation papers and calls for input un

38、til 1 October 2020, and to reschedule most other planned work. In particular, the FCA will relax its programme of routine business interactions, and it will be focusing on business- criticalrequestsbyfirms.TheFCAhaspublishedmore informationonitswebsiteonitsexpectationsoffirms during the coronavirus

39、crisis, including how they should treat their customers. Authors Michael McKee Partner T +44 (0)20 7153 7468 M +44 (0)7968 559 208 Marina Troullinou Associate T +44 20 7153 7797 14 FINANCE AND MARKETS GLOBAL INSIGHT COVID-19 liability management and key considerations for debt issuers Liability mana

40、gement can be employed to manage or mitigate risks where, for example, covenants in existing bond conditions are or will come under stress or where the possibility of future breaches could lead to events of default under the terms of bonds which in turn could result in cross-defaults across an issue

41、rs debt structure. Various types of liability management techniques Liability management methods include tender offers,exchangeoffers,consentsolicitationsoropen market repurchases. Any of these methods or a combination of such methods could be employed for a successful liability management exercise,

42、 especially in a distressed debt environment. Liability Management Techniques Intermediated exchange offers Open market repurchasesExchange offers Tender offers Consent solicitations Tender offer: Anofferbyanissuertopurchaseits bondsbylaunchingapublicofferforthedebt. Exchange offer:Anofferbytheissue

43、rtotheholdersof outstanding bonds to exchange those bonds (in whole or in part) for an amount of newly-issued bonds. Consent solicitations, mandatory exchanges and exit consents: A proposal to the bondholders to consider an amendment to the terms of outstanding bonds. A consent solicitation may be c

44、arried out to avoid a potential breach of a particular covenant, to cure or waive breaches or events of default that In brief. The global markets are a facing a challenge unlike any they have faced in peacetime history. A vast cross section oftheeconomyisexpectedtofacefinancialdistressin the coming

45、months given the upheaval caused by the widespread outbreak of COVID-19. Corporates and/or other issuers who had accessed the relatively robust fixedincomemarketswhichexistedupuntilthebeginning of the outbreak, may now want to assess their options especiallygiventhefinancialdistresswhichcertain sect

46、ors are facing or expected to face in the near to medium term. This may be an opportunity to reassess their capital structure and engage with creditors (including bondholders) early in order to avert or address impending or existing defaults or insolvency situations or, more proactively, seek to opt

47、imise their balance sheet position. 15 WWW.DLAPIPER.COM have already occurred, or to introduce new terms to thetermsandconditionsofbonds.Thetenderoffers andexchangeoffersmayalsobecombinedwitha bond holder meeting where such bond holders are invited to consider a resolution giving the issuer the righ

48、t to call the bonds. This is often referred to as “exit consent”. An exit consent and/or a mandatory exchange are techniques for an issuer to consider where it is necessary for an entire class of bonds to be retired. Open market repurchases: An issuer may consider repurchasing a portion of its bonds

49、 by inviting and/oracceptingbidsoroffersfromparticipants in the secondary market. When undertaking a liability management exercise, thequestionthatwillcomeupfirstiswhatarethelaws and regulations which are relevant for this exercise. Some of these laws and regulations which would be relevant are: the rules and regulations of the relevant clearing system; the law governing th