By: Brenda Lee Hamilton, Attorney
Deutsche Börse has extended its successful equity financing programs to allow Entry Standard listed companies to raise capital through bond offerings, Due to low transparency requirements, the bond listing and/or offering is ideal companies listed or qualified for the Entry Standard of the Frankfurt Stock Exchange. There are no formal requirements for company size, bond sector or a minimum volume of bonds. The Entry Standard for corporate bonds complements the existing Entry Standard requirements for equity offerings of shares. Bonds, just like shares, are issued by the listed companies themselves. The advantage for the issuance of bonds is within the existing regulatory framework of Entry Standard for shares within which the bonds are issued.
About Bonds
Bonds are debt instruments that obligate the issuer to pay the bond holder the principle plus interest. Some bonds have fixed interest rates while others are floating- rate bonds with variable interest rates tied to a benchmark such as a money market index, zero-coupon bonds that pay no interest but are sold at a discount price, and structured bonds with interest rates that are linked to certain liabilities. The rate of interest of fixed-rate bonds is determined in advance based on the market situation, interest rate environment, and the issuer’s creditworthiness. Bonds are traded in percentage points of their nominal value or face value. For example, if a bond is traded at 98 percent par value, the bond holder then pays €98 and can redeem it at face value of €100 upon maturity.
Admission of Bonds on the Entry Standard
The admission of a Company for bond trading in the Entry Standard is one of the fastest and easiest ways to going public on the Frankfurt Stock Exchange. Before the bond issues can commence, the company must publish an approved prospectus consisting of a brief company profile with relevant information about the bond, corporate plan of operations time-table and an audited and certified annual financial statement. If a company is not yet listed on the regulated market, its credit worthiness has to be additionally assessed by one of Deutsche Börse’s accredited rating agencies and its balance sheet ratios must be published. After the issue date, the Company must file current annual and half-yearly financial statements annual follow-up ratings and balance sheet ratios if not already listed within the regulated market of the Frankfurt Stock Exchange. These key figures allow investors to compare companies with each other.
The Role of the Listing Partner
Listing Partners are independent service providers with extensive knowledge of the Entry Standard requirements and procedures. There are approximately 100 Deutsche Börse Listing Partners. In the Entry Standard, companies must mandate at least one Deutsche Börse Listing Partner for its offering.
The Role of the Trading Participant and the Application Process
After preparation the application for the bond offering will be submitted by one of the trading participants registered at the Frankfurt Stock Exchange. This participant also monitors compliance with the transparency requirements, acts as a central interface between the Company and the Deutsche Börse, and functions as the lisason for the company and Deutsche Börse. At the moment, 250 trading participants are registered as applicants, many of whom are Deutsche Börse Listing Partners.
Listing Partners and Applicants
The Entry Standard for corporate bonds leads the way to the exchange bond market for about €30 to 200 million of issuing volume. Choosing a suitable Listing Partner and applicant is the very first step for a company which plans to raise outside capital by issuing corporate bonds within its financial portfolio. These capital market experts will provide the company with a structuring proposal. They also clarify the company’s financing needs, which determine the bond’s maturity – usually between three and ten years for corporate bonds. The eligible interest rate will be calculated depending on the respective interest environment, as well as the issuer’s balance sheet ratios and issuer risk.
Finding investors
Apart from institutional investors, the Entry Standard for corporate bonds also aims at private investors who are reached via specialized press and the Internet. Deutsche Börse frequently announces new emissions on its website www.boerse-frankfurt.de and in its newsletter. Furthermore, corporate bonds are also strongly promoted during their emission in relevant financial publications.
Trading
The trading of corporate bonds listed in Entry Standard is processed within the approved infrastructure of the FWB® and starts immediately after the end of the subscription period. Bonds are traded daily on the established platforms of the Deutsche Börse from 9 a.m. to 6 p.m.
For further information about this article please contact Brenda Lee Hamilton at 561-416-8956 or by email at Bhamilton@securitieslawyer101.com or visit www.SecuritiesLawyer101.com.
This memorandum is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed in the material do not guarantee similar outcomes.
