The European institutions have finally completed their review of the Prospectus Directive regime and have published what are likely to be the final changes market participants will need to comply with from 1 July 20122. MTN and structured note programme issuers (especially those who target retail investors) will bear the brunt of the main controversial and market practice-changing amendments. They are likely to face a somewhat painful process when updating their programme documentation in accordance with the new rules on the contents of Final Terms and summaries at their next update anniversary as the market and the EU’s regulators get to grips with the altered landscape. For standalone bond issuers targeting sophisticated investors with their securities, however, the impact will be less significant and this note outlines what those issuers seeking to have prospectuses approved after 1 July 2012 should look out for.
Let’s start with some good news. If an issuer does not target “the public” with its bond issue, investors who have accepted the offer of securities will no longer have the right to withdraw their acceptance if the issuer publishes a supplement between approval of the prospectus and the later of closing and trading commencing. The two day (maximum) “cooling off” period will now only be applicable to “public offer” transactions. This will mean a change in the wording of subscription agreements to ensure the obligation on the issuer to supplement its prospectus is amended to reflect the new timing requirement and to remove any reference to withdrawal rights. Although not encountered much in practice, the spectre of investors withdrawing from a book after a supplement was always a worry for managers so this change is welcome in removing that risk for wholesale issues.
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