Issuing corporate bonds in Oslo an efficient, flexible and mature market for raising debt capital

Transcription

1 Issuing corporate bonds in Oslo an efficient, flexible and mature market for raising debt capital

2 THE NORWEGIAN BOND MARKET AN EFFICIENT SOURCE OF DEBT CAPITAL Bente A. Landsnes President and CEO of Oslo Børs Norwegian and international companies need to raise capital to carry out projects that involve investment spending in order to continue to grow, even at times of great economic uncertainty. The number of bond issues listed on the two fixed income marketplaces operated by Oslo Børs has now reached an all-time high. Many companies have found that the bond market is a very useful source of financing and a good alternative to borrowing from banks. The Norwegian market has experienced record growth in the number of corporate bonds listed over the years since the financial crisis. It used to be the case that corporate bonds were seen as a source of finance available only to the very largest companies, but the Norwegian bond market has developed over a number of years to become an established source of debt capital for many medium-sized and smaller companies. The high yield market in Norway has developed in pace with the country s capital-intensive industries. A high proportion of the high yield bonds issued in Norway are held by international investors, and this reflects the strong position of the Oslo Børs marketplaces in international industries such as energy and shipping. Oslo Børs ASA was founded in 1819 and operates the only regulated markets for securities trading in Norway. In addition, Oslo Børs also operates the self-regulated marketplace Nordic ABM. The Oslo Børs marketplaces bring domestic and international investors together with worldclass issuers on an ever-increasing scale. The Oslo Børs marketplaces enjoy a unique position internationally for companies in the energy, shipping and seafood sectors. Investor protection and market surveillance, combined with attractive products, are at the heart of our dedication to offer quality markets to our users. Oslo Børs offers a full product range including equities, derivatives and fixed income instruments. The Norwegian investment firms that arrange bond issues have extensive expertise and experience of raising debt capital for industrial companies in general, and particularly in relation to the high yield segment. In addition, the expertise and skills needed to carry out corporate restructurings are a strong feature of the Norwegian market. Norwegian investment firms have developed excellent placement capacity through their local presence and extensive contacts with international investors. This also provides the background for the listed and unlisted companies from all corners of the world that have chosen the Norwegian market to issue corporate bonds. The majority of these companies are from the Nordic countries.

3 ATTRACTIVE FEATURES OF THE NORWEGIAN BOND MARKET Effective venue for raising debt capital The Norwegian bond market, along with London and New York, is often referred to as one of the three most effective high yield markets in the world. Norwegian investment banks have strong placement capacity, and new issues are often fully placed within just a few hours. This makes the market a very effective venue for companies seeking to raise debt capital. A mature market for corporate bonds The Norwegian bond market has both long experience and extensive expertise in raising debt capital for corporate borrowers in general and for the high yield segment in particular. This strong position is in part the result of the important role that capital-intensive and international sectors such as energy and shipping play in the Norwegian economy. Access to investors The capital-intensive nature of Norwegian business and industry has historically made it necessary for Norwegian companies to raise capital from international investors. Norwegian investment banks have developed both expertise and placing capacity with particular emphasis on issuers in the energy and maritime sectors. These are attractive sectors for international investors, and have helped to secure the place of Oslo Børs in the international elite division. A significant proportion of all debt capital in the Norwegian market is currently held by international investors. A choice of two fixed income marketplaces Oslo Børs offers two marketplaces for listing and trading in fixed income instruments: Nordic ABM and Oslo Børs. The choice of marketplace is often determined by the companies policies and investors requirements, particularly in relation to the information made available by issuers, market transparency and market surveillance. Speedy process for admission to listing The process for listing a fixed income issue differs somewhat between the Oslo Børs and Nordic ABM marketplaces. Nordic ABM Nordic ABM offers a speedy process for listing, and the issuer is not required to prepare a prospectus and have it approved by the Financial Supervisory Authority of Norway (Finanstilsynet). It is normally possible to use existing information about the company for the admission process, and Oslo Børs is responsible for approving the loan documentation. For a company that does not already have securities listed on any of the Oslo Børs marketplaces, this process will normally take around one week. If a company already has listed securities, the process for listing a new fixed income issue will take even less time. Oslo Børs In order for a new fixed income issue to be listed on the Oslo Børs marketplace, the issuer must prepare a prospectus and have it approved by the Financial Supervisory Authority of Norway, hence a listing on Oslo Børs will take a little longer than an Nordic ABM listing. An active secondary market Oslo Børs offers an efficient and reliable trading system for carrying out and reporting trades in listed fixed income securities. In addition, systematic and effective market surveillance ensures fair trading conditions. NEW ISSUES AND TAPS IN NOK BILLION INCL. CERTIFICATES (EXCLUSIVE GOVERNMENT BONDS) 350 Oslo Børs Nordic ABM

4 WHY APPLY TO HAVE A BOND ISSUE LISTED? Investors demand listing Following the financial crisis in 2008, an increasing number of investors will only invest in bonds where the issuer is subject to a regulated duty of disclosure. This trend is even more apparent for high yield bonds, where investors are exposed to a higher level of risk. Where bonds are issued by a company that does not have a stock exchange listing, investors seek the reassurance that a listing of the bonds will ensure that the company provides a satisfactory level of information to investors. Listing gives the company access to a larger investor base Companies that arrange for their bonds to be listed normally gain access to a bigger investor base than companies with bonds that are not listed. As part of the listing process, the company is subject to the duty of disclosure. Trading in listed bonds offers investors greater flexibility and security in the form of continuous price quotation, transparency and liquidity. DRILLING

5 THE OSLO BØRS FIXED INCOME MARKETPLACES Nordic ABM was established in June 2005, and is a selfregulated marketplace that is operated and managed by Oslo Børs. This makes it possible for the marketplace s rules and procedures to be tailor-made to reflect the needs of both issuers and investors, independent of EU directives. Nordic ABM is particularly intended for companies that do not produce their financial statements in accordance with IFRS, and do not need to meet the full requirements of a regulated marketplace. However, companies are subject to virtually the same continuing obligations and trading rules as are applied to a listing on the Oslo Børs marketplace, and together with the same systematic and effective market surveillance this ensures a high level of marketplace quality. The process for admission to listing on Nordic ABM is somewhat simpler than for Oslo Børs since there is no requirement to prepare an EEA prospectus for a listing on Nordic ABM. It is often the case that companies can make use of information already in existence for the purpose of admission to listing, and Oslo Børs is solely responsible for the entire listing process. Once a company has listed an issue of bonds on Nordic ABM, the process of listing new bonds in the future is even more simplified and will only require an approved loan description and listing application to be submitted. The Oslo Børs marketplace is our long-established venue for listing and trading of shares and bonds, with a history dating back to The Oslo Børs marketplace is a regulated marketplace in relation to MiFID. Accordingly, this marketplace is subject to EU directives, as implemented in Norwegian legislation. This means that companies must produce a prospectus in accordance with the EU Prospectus Directive when listing their corporate bonds. The prospectus must be inspected and approved by the Financial Supervisory Authority of Norway before listing can take place. Companies are also required to prepare their financial statements in accordance with IFRS. The chart demonstrates clearly that Nordic ABM has developed a sound position as a recognised marketplace. NUMBER OF BOND LOANS LISTED ON 1800 Oslo Børs Nordic ABM

6 LISTING PROCESS Oslo Børs operates efficient listing procedures for both the Oslo Børs and Nordic ABM marketplaces. However, the listing process is just the final phase of a process that starts when the company decides to raise debt capital. In the period between a company starting the process of raising capital and the date on which the bonds are listed and secondary trading can start, the company will deal with a number of the players in the Norwegian securities market. The main contact point will be the investment bank that the company selects as its manager for the issue. Once the company has awarded a mandate to an investment bank, the investment bank will contact the other players required for the process. This will normally involve a trustee for the loan, a securities account operator and Oslo Børs. If the bonds are to be listed on the Oslo Børs marketplace, the Financial Supervisory Authority of Norway must also be involved. Listing requirements Nordic ABM is not subject to the provisions of the Stock Exchange Act, and in terms of the MiFID definitions it is an unregulated marketplace. Accordingly, the process involved in listing a bond loan on Nordic ABM is somewhat simpler than the process required for a listing on Oslo Børs. However, the rules for the issuer s duty of disclosure and the trading rules are virtually identical for the two marketplaces. Listing requirements for Nordic ABM A description of the company must be approved by Oslo Børs. Oslo Børs will evaluate whether the company s annual reports can be used, or whether a separate document must be prepared. The documentation required is reduced if the company: - Already has securities listed on a recognised marketplace, or - Has existed for at least three years and has not changed its corporate structure, business concept or other material features of its activities over this time. Financial statements prepared in accordance with generally accepted national accounting policies are acceptable. The company becomes subject to the duty to disclose information from the first day of listing. Listing requirements for Oslo Børs The company must provide an approved EEA prospectus. Financial reporting must be in accordance with IFRS. The company must provide information on its audit committee. The company becomes subject to the duty to disclose information from the the time of submitting the application for listing. We offer flexibility Oslo Børs is committed to helping Norwegian and international companies to access both Norwegian and foreign investors with the greatest flexibility possible. We have therefore made it possible for companies to: List bonds denominated in foreign currencies (NOK, SEK, DKK, EUR, GBP, USD). Register bonds with Verdipapirsentralen (VPS), Euroclear Sweden (VPC) or Euroclear Brussels. Select their preferred trustee for the issue. Manager for the issue An investment bank will act as the manager of a bond issue. The investment bank is the company s adviser, and assists the company in carrying out the transaction. In addition to producing the documentation required for the issue, the investment bank will also provide assistance with other tasks and with placing the bonds with investors. Loan trustee It is normal for a loan trustee to be appointed to protect the interests of investors in bond loans issued in Norway, and only a very limited number of bond issues do not have a trustee. The appointment of a trustee gives investors reassurance that the interests of bondholders will be protected if for some reason the company fails to comply with the provisions of the loan agreement. Moreover, a trustee gives the company a contact point that represents all the bondholders in a bond loan. Account operator for bonds The issuer s account operator for bonds is responsible for registering new fixed income issues in the central securities depository and for operating the issuer s bond issues. This includes responsibility for registering and maintaining all the fixed data about each issue, as well as checking all payments to be made in respect of the issue. The account operator will be a bank or an investment firm.

7 SPEEDY LISTING PROCESS Raising debt capital Formalising terms Listing on Oslo Børs/Nordic ABM Manager Trustee Account operator Central securities depository registration Prospectus authority (for listing on Oslo Børs) Oslo Børs / Nordic ABM We issued our first unsecured bond loan listed on Oslo Børs in May 2010, raising NOK 700 million. Oslo Børs is a highly respected bond market for the sector in which we operate. It was very pleasing to see strong interest in our bonds from all over Europe, and the issue was placed in full in just two hours. This transaction allowed us to realise our financial strategy of diversifying our debt financing across a number of funding sources. With the support of our manager for the offer, the process of admission to listing on Oslo Børs was efficient, flexible and well managed. Issuing corporate bonds is a very attractive source of debt capital, Oslo Børs is an attractive marketplace for listing and trading, and we intend to carry out further transactions of this type over the coming years. Birgit Aagaard-Svendsen Executive Vice President & CFO, J. Lauritzen A/S J. Lauritzen A/S was founded in 1884 and is a leading supplier of ocean transport solutions with a diversified portfolio of 165 vessels operated through the business areas: Lauritzen Bulker, Lauritzen Kosan, Lauritzen Tanker and Lauritzen Offshore. Managing bond issues is an important area of focus for Nordea Markets, and we see the Norwegian bond market as an efficient and professional market that is open to Norwegian and international borrowers from a wide range of sectors and with various levels of credit risk. Companies find it advantageous to have their bond loans listed because listing ensures transparency and a good flow of information to investors, as well as encouraging secondary trading by increasing the potential investor base. Based on our experience of the speedy, flexible and thorough processes in the Norwegian bond market, we recommend that borrowers should list their bonds on the Oslo Børs or Nordic ABM marketplace. This will give the borrower access to a solid and well diversified investor base. Håvard Woldstad Associate Director, Nordea Markets Nordea Markets is a member of Oslo Børs and is an international player in securities trading, investment research and corporate finance with offices across the Nordic countries and the Baltic States.

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