It is a time of change for debt capital markets participants - the UK has left the EU and is beginning the next phase of Brexit, the transition from the IBORs to near risk-free rates gathers pace and there is ever increased market and regulatory interest in green and other ESG bonds.
In this briefing we discuss what is on the DCM legal and regulatory horizon for issuers over the coming year and how best to navigate upcoming MTN programme updates and bond issuances.
- Green and other ESG bonds: Interest in green and other ESG bonds both among market participants and regulators increased dramatically during 2019. This will continue to be a key topic for issuers over the coming year. Many issuers are considering now the steps needed to be in a position to issue an ESG bond in the short or medium-term.
- Brexit: The UK left the EU on 31 January 2020 and entered into the Implementation Period, which is currently scheduled to last until 31 December 2020. During the Implementation Period, other than some relatively minor documentation changes, Brexit has no legal impact on DCM market participants. It remains important to consider what might happen subsequent to the expiry of the Implementation Period.
- The transition from the IBORs to near risk-free rates: The FCA continues to emphasise that LIBOR users should assume that LIBOR will not be available after the end of 2021 and accelerate efforts to ensure they are prepared for its cessation. Issuers therefore need to understand the implications of this transition both for their new issuances and their legacy debt securities that reference LIBOR.
- The prospectus regime: Since 21 July 2019, all new prospectuses have been required to comply with the new Prospectus Regulation. Many programme issuers which took advantage of grandfathering pre-21 July 2019 will be brought within its scope when they next update their programmes. We are continuing to advise issuers to anticipate a longer prospectus approval process with more extensive regulator comments, in particular in relation to risk factors.
Matthew Tobin (partner), Eric Phillips (professional support lawyer)