For a long time, we have been concerned by the common practice in Over the Counter (“OTC”) derivative markets of end users conducting all their hedging activity with a small group of their “relationship” banks.

Corporate finance theory has long established that companies should maximise their Enterprise Value no matter who the shareholders are.

Banks have traditionally provided funding and hedging acting as principals. The financial crisis has critically reduced banks’ appetite for risk, thus often reducing their role in several traditional investment banking functions to that of ‘matched brokers’.

Buybacks/Refinancing

TradeRisks primary focus is on assisting non-frequent capital market borrowers to refinance their bonds. We find that in the current environment of increasing investor activism and influence, it is the investors, rather than regulations, that dictate the banks' responses to a borrower who wants to buy back its bonds. We believe that bond exchanges or public tender offers are not always in the best interest of non-frequent borrowers who are entitled to buy back their bonds within the rules of the relevant exchange and applicable laws and regulations.

If the terms and conditions of bonds state that the issuer may buy its bonds back, then it is fair that it does just that. If investors think that issuers are typically big buyers and do not want the bonds bought by them because this can reduce liquidity, then why single out just the issuer. This should apply to everybody, including investors themselves who are currently entitled to buy as much of the issue as they want without any disclosure obligation. Hedge fund investors are notorious for doing that.

Our tailored and rigorous approach has achieved over £14m in savings for issuers when compared with the standard investment bank approach to bond refinancings.

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