Member Article

The public health emergency caused by the international COVID-19 pandemic (“COVID-19”) has made it necessary to adopt a range of measures to contain this disease and these measures are having profound economic and financial effects.

At a time when there is a huge reduction in their income, companies will have to cope with enormous pressures on their liquidity. In this context, bond issuances should continue to be a growing way for companies to obtain finance, in particular, in the case of assets eligible under the European Central Bank’s (ECB) purchasing programmes. This note examines specific issues relating to the issuance of bonds by companies that must be taken into account in the current context of the COVID-19 pandemic.

1. Market conditions

Despite the difficulties and demands of the current market conditions, we have noted the completion of some debt issuances placed by means of private offers. The continuing ability to issue bonds, mainly through private offerings, will be essential to ensuring many companies and industries can respond to the current context of enormous pressure on liquidity and survive it.

In this context, the ECB has announced the launch of the Pandemic Emergency Purchase Programme (Pandemic Emergency Purchase Programme or “PEPP”) to purchase private and public sector securities in the secondary securities market with a total value of €750 billion. This programme is very important in terms of instilling confidence and it could make a significant contribution to the success of the private debt issuances that are eligible for the programme (according to the criteria of the current private debt acquisition programme, the Asset Purchase Programme) 1. As a result, it should also help reduce the deterioration in debt issuance conditions for other issuers.

2. Roadshows

In contrast with the normal market conditions, the promotion of issuances through roadshows will have to be done using conference calls with investors or via the Internet. This factor should be taken into account in the guidelines on the implementation of roadshows and interactions with investors.

3. Due Diligence

The implications of the international COVID-19 containment measures for the economy are profound and far-reaching, particularly in the sectors most exposed to these measures, such as tourism, aviation and transport, catering, and entertainment. As a result of this, some issues have taken on even greater importance during the completion of the due diligence processes, in particular:

• The impact of COVID-19 on the activity issuers in affected areas, including the current situation of the issuer's operations in these areas (e.g., if the operations are functioning fully or partially, or if they are suspended);

• Any measures taken or to be taken to cope with the impact of COVID-19;

• Significant limitations on supply and/or distribution chains and impact at the level of employees, as well as other factors that may hinder a return to the company’s normal level of operation;

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