Bonds issuances, documentation

The legal and documentation issues usually raised in a bond issuance are very diverse and, in some cases, very complex. This chapter is intended to introduce the reader to the most important issues, although a thorough analysis would probably require a book by itself. 

The paragraphs below describe the documentation usually involved in a plain vanilla bond issuance. This should not be taken as an exhaustive list, additional documents may be needed depending on the structure of the bond. 

If the issuer were to grant the rights (e.g., covenants, charges, pledges) underlying such bonds directly to individual bondholders at the inception of the deal, the bonds might not be easily sold on the secondary market without modification of the original issuance documentation. Moreover, modification of the issuance documentation would be impractical in such circumstances because, in addition to cost and time considerations, it would be difficult to verify the identities of the parties to the secondary sale and many investors would not want to reveal their identity to the issuer. 

The Notice of Errors. The first mechanism for correction of errors is called a "Notice of Errors." This document may be filed by the patentee after issuance of the patent with the U.S. PTO and references the patent number, issue date, and the errors contained in the patent. The purpose of a Notice of Errors is to clarify the examination history of the patent and such notice dispositively corrects any misspellings, or typographical errors or omissions. One example of a problem which may be clarified by a Notice of Errors is an omitted chemical bond in a compound used in an exemplary embodiment of the invention. In short, the error is obvious and easily corrected. 

We will start with a basic description of the documentation involved in the issuance of a bond to follow with a more detailed analysis of the main legal issues. We will finish with a case study describing one of the most common structures in the market and the legal and documentation matters involved. 

After the mandate letter is signed, the process of preparing all the relevant documentation starts. The length of time needed from the mandate to the issuance depends on the specific circumstances of the transaction, market conditions and the experience of the issuer, it can take from three days in the case of a plain vanilla bond issued under an MTN programme to six or even more months for a structured transaction. 

The role of the trustee in a Eurobond issuance is to serve as a bridge between the issuer of the bonds and the bondholders throughout the life of the issuance. The scope of duties undertaken by a trustee in connection with any given issuance may vary from structure to structure, but the essence of the trustee s role is to hold and exercise as necessary, and as permitted by the trust documentation, the legal rights of each bondholder in the transaction. 

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