Introduction to Fixed Income

Course Overview:

This programme is aimed at practitioners in corporate finance. It is designed to provide a toolkit on fixed interest financing options, with particular emphasis on Bonds.

The programme considers the various fixed interest funding options for both I-Grade and high yield. It explains the key terms and conditions in Bonds, the issuance process and related matters (parties and key documents) as well as the key structuring issues that should be considered.

Other fixed interest instruments are also covered, notably convertible bonds, preference shares so that participants will be in a position to provide clients with advice on which instrument is most appropriate to their needs, whether they will be able to access the market and what the key issues are in structuring the deal.

Course Content:

Introduction: Fixed income instruments

• Bonds
• Convertible Bonds
• Exchangeable Bonds
• Covered Bonds
• Preference shares

Investment Grade vs High Yield markets

• Why this matters
• How it matters
• Key differences
• Review of bond structures

Key terms

• Types of Notes & Coupons
  • Fixed rate
  • Floating / FRNs
  • Zero coupon
  • MTN programmes
• Typical yields & maturities
• Which Companies can access the market: market considerations
  • Typical Debt capacity metrics
  • Issue size
  • Other market-related factors
• Collateral & Security
• Redemption terms & Change of control
• Reporting requirements, Offering venue & Listing & Credit ratings
• Jurisdiction: US vs problems in other jurisdictions

Bonds – issuance

• Review of various bonds structures
  • I Grade
  • High yield – corporates vs Sponsored
• Listing venue & issues
  • London – pros & cons
  • Luxembourg – pros & cons
  • Market Abuse matters
• The 4 key stages in the process
  • Pre-launch
  • Launch & Roadshow
  • Issue
  • Post-issue

Structures of Notes in the European High yield market

• Key concepts
  • Subordination – Contractual vs Structural
  • The Restricted Group
  • Collateral / Security
• Where are we now – typical of deal structures
  • Type 1 – all Bond with super Senior RCF (e.g. Priory)
  • Type 2 –Senior RCF & Loan with (junior) Bond (e.g. Sunrise, Matalan)
  • Type 3 – pari passu Bond / Loan (Corporate) structure (e.g. Ladbrokes)

Key covenants in the bond (overview)

• Limitation on Debt / Ratio Debt Basket: key ratios & issues
  • Fixed Charge Cover ratio
  • Leverage & Secured Leverage ratio
  • The various Permitted Debt (“Capped”) “baskets”
  • Baskets & why they matter
• Value leakage
  • Restricted Payments: who & what is covered
  • Affiliates Transactions
  • Permitted Investments
  • Other Asset Sales
• Security, Liens & Guarantees
  • What to look for
• Change of control – current issues and trends

Convertible, Exchangeable & Hybrid Bonds

• Basic terms
• Issuer benefits
• Investor benefits
• Other types of Bonds – overview
  • Exchangeable Bonds
  • Bonds with warrants

Preference shares

• Rationale,
• Pros & cons
• Types of preference shares
  • Redeemable
  • Convertible
  • Dividend Rights
    • Participating
    • Cumulative
  • PE application