Private placements: tapping the US market

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European corporates are turning to the US private placement market in growing numbers, as they seek to broaden and diversify their sources of funding while locking in some attractively priced long-term debt.

When Smith & Nephew plc, a UK-based medical technology business with more than US$4 billion in global sales, needed to raise US$325 million to repay existing bank debt in January 2014, it opted not to seek out new terms with its existing bank lenders.

Instead, it raised the much-needed US funds via a traditional private placement. These products, sold pursuant to the private placement exemption under Section 4(a)(2) of the US Securities Act of 1933, are securities that are placed with a select group of sophisticated institutional investors, and are exempt from public disclosure and reporting requirements. Issuers are not required to obtain a credit rating for such placement, although the investors typically require that the issuer be investment grade-equivalent (an analysis done by the investors through their in-house credit teams).

For Smith & Nephew, securing US$325 million of debt through a private placement served a number of purposes. Attracting an average fixed rate of 3.7 percent and an average maturity of just over nine years, the company was able to lock in long-term debt at attractive rates while meeting an ambition to spread its funding sources...

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Topics:  EU, Foreign Investment, Investors, Private Placements, Securities Act of 1933, UK

Published In: General Business Updates, Finance & Banking Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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