Ahskara Investments Holdings,

Singapore
Bond Issuance Process
 What is Bond?
• A bond is defined as a debt instrument issued by a company or public
administration and sold to investors in the financial markets with the aim of
securing resources to fund itself. The issuer of the bond promises to return the
money plus previously agreed interest payments (coupon) to the purchaser of
the bond.
• In the case of bonds, the company, with the help of Financial entity as Lead
Manager, issue debt securities in the financial market which are acquired by
investors.
• Bonds allow for longer payment periods while loans are usually of a shorter
tenure.
 Structure of a bond issue

• The structure and terms of a bond issue can vary considerably

depending on the financing needs of the borrower. However, the stages
in any bond issue are broadly the same whatever the complexity of the
particular transaction, and the main documents used are common to
most bond issues.
• Underneath project can be divided into various classes- See the live
example from Next page
Why Singapore Bond Market
• Interest rates are low and Companies get findings in Dollars
• The S$ bond market is a speck in comparison to the $37 trillion (around ₹ 1,931 trillion
today) bond market at end of 2011, according to Securities Industry and Financial
Markets Association
• if companies want to raise funds from investors in the US, they need to raise a minimum
of $500 million but Singapore bond market allows smaller ticket size like SGD 50 Million
• S$ bond market is likely to see sustainable growth as the investors are more open and do
not “overemphasize" on the issuer’s rating.( Hence suitable for Preoperatory projects)
• Three companies—IDBI Bank Ltd, Exim Bank Ltd and Indian Oil Corp. Ltd (IOC)
have raised a total of around S$900 million
 Example of Structure and classes from One single Portfolio
OUTPUT
Leverage
Table
Offered Certificates
Leverages derived from
Class Rating % Capital Individual Leverages from Risk weigtages thickness of tranche
A-1(4) Aaa 0.60% 13.29 166.1091714
A-2(4) Aaa 1.51% 13.29 65.05390911
A-3(4) Aaa 1.99% 13.29 49.33330585
B A2 0.37% 7.33 271.9582853
C A3 0.26% 4.00 386.4465991

Private Certificates

Leverages derived from

Class Rating % capital Individual Leverages from Risk weigtages thickness of tranche
A-1A(4) Aaa 1.64% 13.29 59.86615788
D A2 0.30% 7.33 329.9081125
E A3 0.24% 4.00 413.0100251
F Baa1 0.62% 1.86 159.9107435
G Baa2 0.66% 0.67 149.9006017
H Baa3 1.54% 0.00 63.89836905
J Ba1 2.12% -0.60 46.22301849
K Ba2 3.63% -0.76 26.56002748
L Ba3 3.72% -0.85 25.89386855
M Below Ba3 9.00% -0.92 10.11640711
N Below Ba4 5.42% -0.92 17.45276891
O Below Ba5 3.62% -0.92 26.61467883
P NR/NR 22.06% -0.92 3.533121179
 The stages of a bond issue
The following stages set out the life of a bond in chronological sequence and serve as a guide to
doing a bond issue. The life of a bond can be broken down into four stages:
• Pre-launch. The issuer considers preliminary matters and decides what type of bonds to issue and
how to structure the issue. The issuer mandates a lead manager (see below) and they both instruct
their lawyers.
• Launch and roadshow. The lead manager announces the bond issue publicly and promotes the
transaction to prospective investors, inviting them to buy the bonds once they are issued.
• Issue. This involves two stages:
• Signing. The managers sign the subscription agreement, agreeing to subscribe the bonds on
closing.
• Closing. The fiscal agency agreement or trust deed are signed and the bond instrument is created.
The investors receive the bonds from the issuer in exchange for payment of the purchase price of
the bonds.
• Post-issue. The issuer pays interest to the bondholders as agreed until the bonds reach maturity,
when the issuer will repay the principal amount of their original investment to the bondholders.
 Stage 1: pre-launch
• Once the issuer has identified a need to borrow and decided to do so by issuing bonds,
there are a number of things that it should do before launch.
• Can the issuer issue?
• Before embarking on a bond issue, an issuer needs to ensure that there are no legal
barriers to the issue. International issuer should check that:
• The issue is within the powers of the issuer as set out in its memorandum and articles
of association.
• There are no borrowing restrictions in the articles of association or in agreements to
which the issuer is a party.
• The issuer can give a negative pledge (an undertaking not to create security for its
other indebtedness or, more narrowly, for its other bond issues) in an acceptable
form.
 Structuring the Bond issue
• Bearer or registered. Bonds can be issued in one of two forms: bearer or registered.
Bonds were traditionally issued in bearer form but now often appear in registered form
to satisfy legal requirements in a number of jurisdictions, which require securities to be
registered. for more information on bearer and registered bonds
• Global or definitive. When bonds are issued, the bond document can be either
in global or definitive form.
• Listed on a stock exchange. An issuer may decide to list and trade the bonds on a stock
exchange.
• Rated by a credit rating agency. The issuer may decide to seek a rating for its bonds,
which indicates the relevant agency's views of the likelihood of the issuer defaulting on
repayment, and is therefore an indicator of the risk of investing in its bonds.
Parties Involved and Roles
• Lawyers. The issuer and lead manager instruct lawyers to draft the documents (usually the lead
manager's lawyers), comment on the drafts and prepare the legal opinions.
• Lead manager and managers. A financial institution usually arranges the entire transaction,
including the sale of the bonds, legal documentation and settlement procedures. This is the lead
manager. It then contacts other financial institutions (called managers) to form a syndicate that
agrees to buy the bonds (to sell to investors).
• Paying agents. Paying agents are financial institutions that act as the agents of the issuer in making
payments of interest and principal to the bondholders throughout the life of the bonds.
• Trustee (or fiscal agent). A bond issue usually has either a trustee or a fiscal agent. There is never
both a trustee and a fiscal agent. A fiscal agent acts for the issuer as a principal paying agent while
a trustee acts on behalf of the bondholders as an intermediary between them and the issuer.
• Printers. Specialist financial printers may need to be instructed to print the prospectus and, if
applicable, the definitive bonds.
• Auditors. The issuer's (and, if applicable, guarantor's) auditors need to be informed of the bond
issue and provide comfort letters to the managers at signing and closing.
 Process Flow Chart
Custodian Bank in which Funds
will be deposited for Issuer to
draw it down to underneath.
Rating Agency
Issuer- Project owner be a company or indidual
Trustee or Fiscal Agent- Custodian of Funds.
Usually a bank which will accept the funds and
release it as per instructions from Issuer
Lawyers- Law firm
Rating Agency- Usually work in tandem with
Lead manager and structure the Bond issue in
various tranches and under different classes like
subordinated, unsecured etc and provide
certificate
Lead Manager- Bank or Financial institution
Clearing sysem- Euroclear or Bloomberg or
Clearstream
Managers- Financial Institutions who comitt
capital as anchor investor in the issue of bond
 Launch of Issue
• Launch of issue
• Financial Institution will buy the bond issues using DVP ( Delivery Versus Payment)
from Euroclear, Bloomberg or Clearstream
• Payment will go to designated Custodian account and Custodian bank will accept
instructions from Issuer only

The End