Xinhu (BVI) Holding Company Limited’s offering of US$700 million in guaranteed senior notes marked the largest debut high-yield bond issuance by a PRC company since January 2013 and a process requiring expertise, resources and commitment, the legal counsel involved said.
Zhou Hao, a Hong Kong-based partner at King & Wood Mallesons (KWM), said the process was a big challenge for the firm. “Firstly, it is widely known in the market that a US law-style high yield covenant package is very complicated,” he said. “A typical summary of the covenant package included in the offering circular will be more than 150 pages long. It takes years for a lawyer to build up sufficient knowhow and experience to grasp this technology.”
Second, said Zhou, it takes issuer’s counsel a lot of time to educate the client on everything from the basics to tailoring the covenants based on specific business needs in first-time issuances, although this process should get easier in repeat issuances.
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