- Sovereigns
- Private Equity & Infrastructure Funds
- Housing & Social Infrastructure
- Transport & Utilities
- Pension Funds
End Investor Funding
Capital Markets
TradeRisks is actively involved in both the raising and/or refinancing of capital markets debt. This includes both straight corporate bonds/listed and rated notes and, before the financial crisis, securitisations. Our team has significant capital markets experience and is able to offer clients advice and full transactional services including placement and execution.
Since the start of the financial crisis, banks stopped all underwriting of bonds and also effectively stopped making secondary markets (i.e. bid offer spreads of 25 basis points on 30-year bonds do not constitute a secondary market).
The lack of underwriting on the part of investment banks for primary bond issues combined with no liquidity in many parts of the secondary market has reduced their role to that of “matched brokers”. Matched brokers do not need capital, which means that more efficient providers have entered the market for this and other functions, which were formerly the preserve of investment banks. This provides borrowers with additional choice and competition and is a development which is congruent with moves by regulators to create new direct lending channels between end investors and borrowers.
Furthermore, the investment banking model sees banks standing between borrowers on the one side and investors, from whom they derive significant revenues on the other. In its role as advisor and bond arranger, TradeRisks acts firmly in the borrower’s interests while also providing investors with a fair and transparent distribution mechanism for bond allocation. Our experience suggests that this leads to a better and more predictable outcome for the borrower, and a more fair distribution across both average institutional investors and the largest players.
As such, sophisticated borrowers are increasingly willing to interface directly with institutional investors in the same way that they have previously done with bank lenders, a trend that is also supported by the authorities and investor community.
Own-name Bond Issues
For individual funding requirements of £150m or more in the capital markets, TradeRisks advises and manages every stage of the process from the initial identification of funding requirements to the structuring of the documentation and obtaining a credit rating, preparation of road show materials and placement and settlement of bonds with investors through a process offering transparency for both borrowers and investors. We have acted as Bond Arranger on three major bond market transactions for Circle Anglia Treasury Limited, Sovereign Group and Notting Hill Housing Trust.
Borrowers benefit from our transaction management expertise which streamlines process, shortens timetables and reduces transaction costs. We have also led a number of structural innovations including a gilt purchase mechanism designed to reduce the cost of carry for borrowers without the typical associated accounting volatility.
The largest corporate borrowers with particularly sophisticated treasury departments may be equipped to deal with all of the rating, structuring and documentation aspects of a bond issue/tap issue. However, the final stage of price guidance, running the order-book, allocating and settling the issue requires additional specialist infrastructure which will not be cost effective for most treasury departments to put in place and maintain. In these circumstances, TradeRisks provides the market presence and necessary infrastructure to enable the efficient completion of the transaction at a cost commensurate with the role undertaken.
Listed and Rated Notes through OTC Exchange
TradeRisks also provides its clients with the full range of advice and services required when undertaking these issues below the £150m typical benchmark issue size. TradeRisks acts as arrangers for these issues, which we refer to as rated and listed notes, via OTC Exchange, the platform set up by TradeRisks to allow a direct interface between sophisticated borrowers and institutional investors. OTC Exchange provides investors with access to multiple individual credits but with standardised terms and documentation and a common brand. Importantly, and in contrast to structured group vehicles, this route offers full credit transparency allowing investors to reflect their risk return appetite for different credits. The ability to approach multiple investors represents a better option for borrowers than the traditional bi-lateral private placement route where, after a long documentation negotiation process, the borrower was frequently left with the option to accept the terms a single counterparty was willing to agree to or to pay both parties' legal costs and pull out. TradeRisks' deal management expertise, standardisation of documents and ability to place issues directly with investors has enabled the costs associated with deals of this size to be reduced significantly.
Private Placements
Although our preference is for borrowers to maintain options with multiple investors, where circumstances determine this to be the most appropriate route (for example on financings of a specialist nature), unlisted, bi-lateral private placements can be arranged with the active investors in this area.
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.
