Asset Backed Bond Offering

We Are Crafting Your Business Bond Offering.

Bond Offering

• For qualified project candidates looking to raise project funds in the capital markets.
• Bonds arranged/underwritten by TCI Capital Markets.
• Interest rate and maturity term customized to project/issuer requirements.
• Project/issuer pledges acceptable collateral 2x value of the bond offering.
• All bond sales through TCI are on a “best-efforts” basis.
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Our Basic Work Process

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Bond Offering Structure – via Special Purpose Vehicle (BVI)

The British Virgin Islands are becoming an increasingly popular jurisdiction for establishing asset holding entities, and in particular, special purpose vehicles (“SPVs”) for use in asset-backed financing transactions.  

Structure 

In this particular asset-backed bond offering, the transaction will involve the company/issuer transferring ownership of the asset to an independent company that is set up in the British Virgin Islands (BVI) for their asset. The asset is now utilized as a security in the SPV and is pledged in favor of new bondholders who will provide the capital to the underlying issuer/sponsor of the SPV.  

The directors of the SPV are often independent trustees provided by a dedicated corporate services provider with experience in securitization structures. 

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The Parties involved:

• Arranger or lead manager (licensed investment bank in the Cayman Islands – i.e. TCI Capital Markets). These are appointed by the issuer to arrange the issue of debt securities and manage the issue process, including the structure, timing and pricing of the issue.

• Trustee. A trustee is appointed by the issuer. The trustee acts on behalf of the bondholders, so owes them a duty of care under common law trust principles. The trustee is given discretion in the exercise of its powers under the trust deed. Circumstances where the trustee is sometimes given discretion include, in relation to the following provisions: – events of default; – a substitution of the issuer; – making certain determinations as to materiality; – the absence of material prejudice to the interests of the bondholders.
• Paying agent. The paying agent is primarily responsible for the payments to bondholders as well as handling bond subscriptions and opening the bank account for the SPV.
• Valuation/appraiser. A valuation or appraisal must be performed on the assets prior to transferring the ownership to the SPV. This valuation must not be older than 60 days. If an asset is market tradable, then the current market price can be used.
• Lawyers. The issuer, the lead manager and the trustee usually each appoint legal advisers. The lawyers usually take responsibility between them for preparing the offering documentation and transaction.
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Documents

The main documents produced when issuing and listing debt securities are: 

• Offering document. An offering document is a document describing the asset-backed bond offering. It contains the name of the issuer, its business, use of proceeds and risk associated with investing in their bond.
• Deed of Covenant. This is a contract between the issuer and the trustee that covers, among other things: – the requirement of the issuer to pay; – the trustee’s powers and duties; – the appointment and removal of the trustee. This also gives bondholders direct rights of enforcement against the issuer if an event of default occurs.
• Paying agency agreement. This is a contract between the issuer and the various paying agents, which sets out, amongst other things, the mechanism by which the issuer pays the principal and interest.
• Global note. Generally, once all the bonds have been sold and to improve liquidity a global note is a single document representing the whole issue that is deposited with a bank for safekeeping on behalf of the “clearing systems”.
 
– Underwriting and compliance fee. Paid to TCI Capital Markets. Fee includes SPV set up. Legal counsel appointed to issuer and advisory. US $150,000 plus 5% sales fee per bond sold.
– Trustee fees. Onboarding fees range from US $5,000 to $20,000 depending on size of transaction and asset structure. Yearly trustee fees up to $10,000 to$20,000
– Paying agent fees. To be determined by the number of bondholders and frequency of interest payments.
– Trustee lawyer fees. Lawyers who represent the trustee as w