Bond Asian Ventures (BAV) has developed a process for creating off market bonds, with the option of bringing them on market at a date agreed with the counter party.
The process, based on a example bond of $1 billion, is as follows.
Off Market Bonds
BAV establishes a special purpose vehicle (SPV; hereafter FundCo) and instructs its attorneys to author a funding agreement for $1 billion debt investment over an agreed tenor at an agreed coupon. The condition precedent is $250 bank guarantee (BG).
The Finance Minister instructs the Central Bank to issue a $250m BG in favour of FundCo’s bank.
FundCo opens a non resident bank account at the Central Bank, which will be the recipient of FundCo’s $1 billion investment.
FundCo authors and issues an investment memorandum (IM) to its investor panel, who subscribe to invest $1 billion debt.
Investors sign subscription agreements and remit their investment into FundCo’s account.
FundCo remits the funds to its non resident bank account at the Central Bank.
On Market Bonds
If the counter party wishes to bring the off market bond on market:
The Finance Minister authorises FundCo to instruct its attorneys to author a bond investment memorandum (BIM), transacting same with the UK Listing Authority (UKLA).
A roadshow is undertaken to interested investors to subscribe to the bond.
The Finance Minister ensures the Central Bank has created the necessary structure to receive the Bond proceeds.
In the best case scenario, the roadshow attracts $1 billion of new debt investment ($1 billion on market + $1 billion off market = $2 billion). To whet investors’ appetites, agreed tranches of the funds in the non resident account at the Central Bank can be used to invest in the bond. The entire proceeds from the off market transaction can be incorporated into the bond transaction, taking said proceeds on market.
In the worst case scenario, the roadshow attracts no new debt investment, and 100% of the $1 billion from the off market transaction is invested in the bond.