The ICMA Primary Market Handbook
Ruari Ewing, ICMA
1 December 2015
Background – ICMA history
International Primary Market Association (IPMA) formed in 1984
 Independent trade association for leading underwriters of international issues of debt
(and equity to an extent)
 Main organisation covering new issue procedure for Eurobonds - Harmonisation /
establishment of good practice based on consensus of the major securities houses
 Neither an exchange nor a regulator: recommendations, not rules (and no IPMA power to
sanction)
IPMA merged with the International Securities Market Association (ISMA) in 2005
 ISMA was a trade association and self-regulatory body for the secondary markets,
founded as the Association of International Bond Dealers (AIBD) in the 1960’s
 ISMA/IPMA merger created the International Capital Market Association (ICMA) – 38
staff across Zurich (seat), London (largest office), Paris and Hong Kong
 ICMA’s 366 full members include global investment banks and smaller regional banks
and securities houses and its 127 associate members include exchanges, central banks
and more recently institutional investors, borrowers and law firms – so issuers,
intermediaries, investors and service providers (accross 57 countries)
 The IPMA philosophy now applies to ICMA’s primary market activities
Background – ICMA work
 Development and maintenance of high standards of market practice (inc.
documentation)
 Fostering appropriate levels of regulation and assisting market understanding
 Educating market participants and others through formal training and research – ICMA
Centre, University of Reading
 Facilitating communication (inc. between functions: business, legal, compliance) and
establishing information forums and other events
 ICMA Market Practice & Regulatory Policy department: a dozen or so staff in London;
three in Hong Kong and two in Paris
 Current focuses: post-crisis initiatives (CRD, Basle, CRAs, sovereign debt); post trade
transparency; secondary illiquidity; FSAP Directive reviews (PD III, MAR, MiFID II); CMU;
FEMR / FICC Market Standards Board; green bonds; private placements; automation...
Background – ICMA documentation
 ICMA newsletter (“Quarterly Report”)
 ICMA Primary Market Handbook – Primary markets
• Primary Market Practices Committee
• Legal & Documentation Committee
 ICMA (ex-ISMA) Rulebook – Secondary markets
• Secondary Market Practices Committee
 Global Master Repurchase Agreement (GMRA) & related legal opinions – Repo markets
• European Repo Council & Committee
 Ad-hoc publications
Japanese withholding tax 1998 and 2000, NGN documentation, “senior” and “negative
pledge” covenants, AMTE buyback recommendation, UK 2004 allocations
Alternative execution processes (non-retail)
Auction
 Asking investors to bid (potentially limited to primary dealers)
 Typically simpler / reputed assets – sovereign treasury issues
Syndication
 Asking several intermediaries (syndicate of lead-managers and co-managers) to find
appropriate investors
 Retention – Allocation to individual managers to distribute at their discretion (subject to
selling restrictions)
 Pot system – Central book of investor orders managed/allocated by bookrunners only
(current Euromarkets standard)
Private placement – Direct approach to a small number of investors
Considerations:
Market feedback / Control / Name give-up / Underwriting / Fees
Size / price / engaged bondholders / Broad investor base for future transactions
Handbook - Euromarkets
(institutional) deal flow context
1.
Programme establishment / update
10. Closing of order book
2.
Investor meetings (if needed)
3.
[Mandate]
4.
[Pre-sounding (if needed)]
11. Launch – “€1bn at 170bps” (definitive
size and spread, inc. any new issue
premium)
5.
Announcement – e.g. “Shell 5-year
benchmark” (“mandated”) [+ initial
syndicate communication] + Red
herring / supplement publication (if
needed)
6.
Roadshow (if needed)
7.
Initial price thoughts (if needed)
8.
Spread guidance (“180-190 bps”) and
opening of order book (could be folded
into ‘announcement’)
9.
12. Allocation (overallotment if needed*)
13. Pricing – “99.7%” (NPV + round 1/8
coupon) [+ Confirmation to managers]
14. Leads ‘free to trade’*
15. [Signing – subscription agreement] and
prospectus / final terms publication
16. Closing – release of funds vs. global
note
17. Settlement – accounts credited in
clearing systems DVP
Revised guidance (if needed)
*Stabilisation purchases might begin if needed at any time from ‘free to trade’
Handbook – Introduction
 History – 1985 launch as the “IPMA Handbook” with just a few short pages covering the
issuance of straight Eurobonds; 2012 rebranding as the “ICMA Primary Market Handbook;
2015 remodelling (feedback welcome)
 A “live document”, continuously responding to market developments – committee / working
group discussions, competition law review, formal approval, publication (and always
something to review); as and when challenges arise, so ultimate ‘legacy’ document...
 Not exhaustive: Between ‘four walls’ of what is mandated / prohibited by law/regulations
and what is obvious / lacks consensus (contentious  PMH  obvious); Normative rather
than formative; Also (so far) influenced by the European regulatory context
 Intra-syndicate transparency and timeliness – Legitimate expectation as to transaction
unfolding for managers invited to join a syndicate (and basis for reasonable reproach
otherwise); NOT aimed at protecting other market parties, solving market imbalances or
(generally) regulatory gaps; Focus on execution process (not deal fundamentals)
 Basis for in-house procedures and precedents
 Key themes: transparency, fair play, timeliness, standardisation, efficiency
Handbook – Users
For application
 Bank syndicate desks and/or related compliance officers – on ‘business’ / ‘conduct’
aspects etc., e.g. payment of banks’ fees, allotment, initial syndicate communication,
stabilisation
 Bank lawyers (in-house) – e.g. relationship clarifications (dealers vs arranger),
confirmation to managers, agreement among managers (‘AAM’), stabilisation notices
 Bank lawyers (in-house and external counsel) – final terms, status of lead-counsel to
managers, timely document circulation…
For information
 Issuers (e.g. matching bonds and back-to-back swaps), investors (e.g. on bookbuilding
and allocation), clearing systems (final terms) and others (regulators, auditors, paying
agents...)
Handbook - Accessibility
Hard copy
 Paying subscription: initial purchase and annual update
service
 But free allowance (and then discounts) for ICMA
members
 ‘Glossy’ updates distributed by post on an irregular basis
(e-mail PDF alerts in meantime)
 Onus on recipients to ensure update reception (inc.
registration with update service) and processing
On-line at www.icmagroup.org
 Single consolidated PDF with internal hyperlinks
 Free to members, otherwise paying subscription (but
recent updates free to view)
 Updated same day as PDF alerts dispatched
 Archive
 Table of destinations (2015 remodelling)
 Member / subscriber log-in username & password
Handbook – Contents
 12 Chapters of Recommendations and guidance (Sliding scale – form vs content):
1. Scope
2. Programme establishments and updates
3. Prior to transaction announcement
4. Transaction announcement
5. Bookbuilding and launch
6. Allocation and allotment
7. Pricing
8. Confirmation to Managers
9. Stabilisation
10. Documentation and signing
11. Closing and settlement
12. Euro commercial paper
 Following deal-flow chronology, so some concepts repeated (e.g. timely circulations);
some judgement calls as to where items should fall in timeline
 Some Recommendations set out what is good practice; others that whatever practice is
to be followed should be disclosed; and others that a proposed practice should be agreed
or just discussed.
 17 Appendices of guidance and standard language (status open)
 Glossary, Reader’s Guide and (boozy lunch outcome) Index
 Approximately 350 pages (front end is 20 pages) (408/48 if including dividers)
Handbook – Scope
(1.1) Handbook applies to
 syndicated international primary bond offers;
 related programmes;
 euro-commercial paper (programmes and related trades)
But not high-yield, equity-linked or (bar R4.10 ‘carve-in’) USD-denominated global
bonds
ICMA members expected to comply with ICMA ‘Recommendations’ when leadmanaging / arranging the above (R1.2)
All lead-managers (including non-ICMA members) expected to give prior notice if
offering internationally a deal that follows domestic market practice (R1.3)
Handbook subject to law (1.4)
Deal flow – Programme establishment
/ update
(unless standalone deal)
 Legal counsel no conflict (R2.1)
 Draft docs circulation (OC, agreements,
arrangement letters, draft CPs - and A2) 5
BDs before comments deadline (R2.2/3) –
blacklined from any priors (R2.5)
 Colour on pre-negotiated points /
significant changes (R2.6)
 5BDs between dealer comments and
signing (R2.7)
 No naming of commenting dealer
without consent (R2.8)
 Sufficient time to prepare for conference
calls (R2.9)
 Docs to include form of final terms /
pricing supplement (R2.10 and A8)
 Issuer i/c programme up to date (2.11)
 Full update at 12 months max (R2.12)
 Potential credit rating language (A4)
 Drawdown authorisations where possible
or flag outstanding (R2.14)
 CPs to include comfort letters (and A2)
and legal opinions (R2.15)
 Dealer permission for arranger to wave
CPs (R2.16)
 Final docs circulation promptly (key docs)
and within 2 weeks (full bible) (R2.17)
 Final docs circulation to agents/ICSDs
(R2.18 + A11)
 Other updaters to notify arranger (R2.19)
Deal-flow – Pre-announcement
General
 Legal counsel no conflict (R3.1)
 DD to be carefully considered (R3.3) but cannot be prescribed as variable (3.4)
 Issuer i/c programme up to date (3.5)
 Consider US/non-US diffs. in global deals – e.g. several U/writing and DTC closing (R3.8)
 Big things impacting investor rights to be escalated to deal title (R3.9) – e.g. cocos
Investor meetings (if needed)
 Invites to be public (R3.6) (and more in A12#3&21)
Mandate
 Passives looped-in 48 hours / 2 BDs pre-announcement + invited to DD calls (R3.2)
Pre-sounding (if needed)
 Discuss info to be disclosed, whether inside and related procedures (wallcrossing /
cleansing) (R3.7 + A12#4-6)
Deal-flow – Announcement
e.g. “Shell 5-year benchmark” (“mandated”)
General
 No zero underwrite (R4.3)
 [Retention] No commitment repurchase /
allotment reduction (R4.5) and initial
comitment
 [Drawdown] Circulate programme docs
on demand (R4.7)
 Circulate draft agreements / ‘red’ OC to
any named manager 2 BDs pre-investor
circulation (R4.8)
 Assume US selling restrictions unless
otherwise confirmed (4.9) (c.f. initial
syndic comm.)
 [USD globals] Pass on US affiliate/counsel
contacts (R4.10)
 Draft Ts&Cs circulation ASAP to ICSDs (via
agent on drawdown) (R4.11 + A11) +
Agree any new agent/ICSD responsibilities
(R4.12 + A11)
Initial syndicate communication
 Short list specific info (issuer name...), but
anything syndicates would expect at that
stage – inc. major disapplication and (+A6
EGs) domestic style (R4.1)
 [Retention] selling group (and related
claw-back) and name give-up (R4.2)
 Not publically name until acceptance
(R4.6)
Red herring / supplement publication
 Refer issuer i/c programme up to date
(infra)
Roadshow (if needed) (and A12#8)
Deal-flow – Bookbuilding and launch
General
 For domestic ‘style’ – consider differences
vs. international (R5.2 + A6) [c.f. €
introduction]
 Clearwater for taps (after closing only)
(Disapplication N/A) (R5.3) and offer
increases (inc. fees) pro-rata (R5.4-6)
 [Retention] No name give up except direct to
issuer for compelling reasons (R5.7) and not
national confidentiality / customer consent
laws (5.8)
 Get any issuer allocation priorities early (at
least pre-draft) (R5.9)
 Docs (notably) OC direct investor access
ASAP (regardless public) and
(debut/infrequent issuers) on request 3 days
pre-book open (R5.11/12 + A12#8/10)
 [Pot] Any book disclosure pre-agreed and
public (R5.13 + A12#18-20&21)
 [Retention] Commitment notification and
allotments by launch CoB
Initial price thoughts (if needed)
 Terminology (“whispers”) and public (R5.1 +
A12#7)
Spread guidance (“180-190 bps”) / order book
open (could be folded into ‘announcement’)
Revised guidance (if needed)
A12#12
Closing of order book [and/or going ‘subject’]
 Books open at least 60 minutes unless issuer
consent otherwise (R5.10 + A12#8-11)
Launch (“€1bn at 170bps”: definitive size and
spread, inc. any new issue premium)
Deal-flow – Allocation/allotment,
pricing and confirmation to managers
Allocation and allotment
 [Pot] Any allotments to managers by
pricing (R6.1)
 [Retention] Any selling group claw-back
pro-rata to commitments (R6.2)
 Any distribution disclosure to be preagreed and public (R6.3 + A12#18-20&21)
 [Pot] Passives’ access to distribution data
by CoB pricing + 1 (R6.4)
 Allocation considerations (A12#13-17)
Pricing (“99.7%” - NPV + round 1/8 coupon)
 Inform in good time pricing
timing/reference, and promptly re. any
change and immediately on pricing (R7.2)
 All Gilts OK as sterling references, unless
e.g. high coupons, illiquid or better
maturity match (priority list) (R7.4) and
price new issues off ‘mids’ (R7.5)
Confirmation to managers
 ASAP post-pricing (except short-form
allotment doc for JLM-only deals) (R8.1)
 Basis for commitment, subject to Sub
Agmt (R8.2) and to enable confirmation
of participation (R8.3)
 Detailed content: syndicate info,
commercial terms, docs aspects (inc.
AAM – A1), selling restrictions, PoA,
payment arrangements (8.4); OK to x-ref
to programme but disclose issue
deviations (R8.5)
 No acceptance needed (8.7)
 No withdrawal unless (i) confirmation to
managers inc. basic term changes (vs.
prior info) or (ii) terms change materially
vs. confirmation (R8.8)
 Short-form allotment doc content ideas
(8.6)
Deal-flow – Stabilisation
Leads ‘free to trade’
Stabilisation
 Docs LM is stab coordinator (R9.1)
 Only stab if appointed as stab manager by coordinator and note general law (A15) and
AAM (A1) (R9.2)
 Coordinator to copy pre- and post- notices and regulator reports to other stab managers
promptly (R9.3)
 EU stab regime recap, pre- and post-sounding announcements and OC stab legends (A15)
 N.B. new MAR
Deal-flow – Documentation and signing,
and Closing and settlement
General
 Ts&Cs to include ICMA Force Majeure
(R10.1 and A9)
 Circulate 2BDs pre-signing docs
(agreements, OC, supplement, auditor
letters, legal opinions...), blacklined as
relevant (R10.2)
 No naming of commenting manager
without consent (R10.3)
 [Standalones] Comfort letter CP (R10.1
and A2)
 Consider enforceability, as ICSDs will not
enforce (10.5)
 Final soft docs circulation promptly
(OC/PS/FTs, Sub Agmt any signing CPs)
(R10.6)
Closing and settlement
 Pay fees by closing (R11.1), gross of legal,
listing, printing, stab etc costs and leadmanager expenses (R11.2/3&6); Intra-LM
reimbursments to be prompt and w/in 6
months (R11.4)
 Stab economics shared pro-rata among
LMs, but capped at passives’ fees (R11.6)
 Closing CPs: legal opinions and comfort
letters (R11.7 and A2), inc. anything not
covered by programme opinion (e.g. Sub
Agmt LVB) (11.8)
 No CP re. 3rd party agreements (e.g.
swaps) (11.9)
 Final docs circulation to agents/ICSDs
(R11.10 and A11)
 Definitives delivery vs. temp globals
(R.11.11)
 Full bible within 2 weeks of closing
(R11.12)
Handbook – general themes
 Organising syndicate banks – Allotments, fee payments
 Improving disclosure – Initial syndicate communication and confirmation to managers,
updating base prospectus, provision of draft & final documentation, final terms (A8) –
N.B. intra-syndicate vs. public disclosure
 Explaining new and existing market practices – Calculation agency (and back-to-back
swaps) (A3), NSS (‘New Safekeeping Structure’) for registered notes (A10), pre-sounding,
bookbuilding and allocations (A12)
 Applying regulation – Withholding tax (A17), selling restrictions (A13), stabilisation
materials (A15), PD exempt vs non-exempt offers (A16)
 Standardising documents/wording – day count fraction (A5), Force majeure (A9),
Agreement among managers (A1), auditor comfort letters (A2), ECP documentation (A7),
as well as A8 and the ‘applying regulation’ items
More than one theme possible
Handbook – business/syndicate themes
 Discuss soundings approach (R3.7)
 Taps/increases: clear water / pro-rata
invitation (R5.3-R5.6)
 Passives: 48 hours’ invitation preannouncement (R3.2) and access to
 No name give-up in retention (R5.7), and
distribution (R6.4)
legal confidentiality considerations (5.8)
 Initial syndicate communication (R4.1,
 Books open 60 minutes (R5.10); Pre-agree
R4.2): earliest possible time before pricing
any book disclosure (R5.13)
or publicly associated; information
 Allocations: Seek early issuer input (R5.10);
reasonably expected at early stage (inc.
any manager allotment by launch
major Recomendation disapplication / if
(retention/R5.14) or pricing (pot/R6.1); any
following ‘domestic’ style)
selling group claw-back pro-rata to
 Consider domestic differences (R5.2) [A6]
commitments (R6.2)
 Not publicly associate without acceptance  Pricing: Notify (R7.1) (and also when free to
(R4.6)
trade - R7.2); Gilt references for GBP (R7.3R7.5)
 Minimum underwriting commitments
(R4.3-R4.5)
 Stabilisation: Docs bank is coordinator
(R9.1); not stabilise if not appointed by
 Appropriate bond titles (R3.9)
coordinator and beware law/AAM (R9.2);
 Agree new asset servicer procedures
Coordinator copy managers on pre-/post(R4.12)
notices (R9.3)
Handbook – legal/TMG themes
 Confirmation to managers (Ch.8): Information (inc. x-references) for managers to
confirm their participation (R8.3); no ‘acceptance’ (8.7); No withdrawal unless basic
change or (later) material deviation (R8.8); Alternative short form allotment
document (8.6)
 Expected: documents/content (2.3, R2.10); conditions precedent (R2.15, R10.4) and
related dealer consent to waiver (R2.16); corporate authorisations (R2.14)
 Timely provision of draft/programme documents/CPs (R2.2, R2.4, R4.7, R4.8, R10.2),
with redlines (R2.5, R10.2) and highlighting heavily negotiated points / significant
changes (R2.6)
 Time to (i) comment (R2.7) (and related syndicate anonymity - R2.8, R10.3) and (ii)
prepare for meetings (R2.9) and due diligence calls (R3.2)
 Due diligence: Consider (R3.3) but level variable (3.4)
 Include force majeure (R10.1)
 Timely provision of final documents to syndicate, asset servicers and investors
(R2.17, R2.18, R4.11, R5.11, R5.12, R10.6)
Handbook – other themes
Economics
 Fees by closing (R11.1) and gross of
issuer/LM expenses (R11.2, R11.3) - inc.
stabilisation costs (R11.6)
 Intra-LM expense reimbursement
promptly / within 6 months (R11.4)
 LMs share stabilisation economics prorata, with passives capped at fees (R11.5)
Cross-cutting
 Communications to be public: scheduling
of investor meetings (R3.6); IPTs (R5.1);
any disclosure of demand (R5.13) or
distribution (R6.3)
 Programmes: Update (2.11, 3.5), 12 month
limit (R2.12), non-arranger update
notification (R2.19)
 Law firm no conflicts (R2.1, R3.1)
 Beware ICSDs’ non-enforcement (10.5)
 US: Beware non-US differences (R3.8);
assume no US sales permitted (4.9);
facilitate affiliate communication (R4.10)
Euro Commercial Paper
 Minimum denominations in 9 currencies
(R12.1) and additional JPY increments
(R12.2)
 Tenor limits (R12.3)
 Beware legal selling restrictions (12.4)
 Certain other Handbook provisions apply
mutatis mutandis (R12.6)
Handbook – Annexes
 A1 Agreement Among Managers (Versions
1 and 2) – Standard agreement
 A2 Auditor letters – Standard engagement
and comfort letters
 A3 Calculation agency role regarding
certain derivative-linked securities –
Explanation
 A4 Credit ratings in programme offer
documents – Standard language
 A5 Day count fraction: ICMA Actual/Actual
– Standard language
 A6 Domestic market customs – Examples
of differences
 A7 ECP documentation – Standard dealer
agreement, info memo and global note
 A8 Final terms and pricing supplement –
Standard forms
 A9 Force majeure – Standard language
 A10 New safekeeping structure (NSS) for
ICSD-cleared registered bonds –
Explanation
 A11 Paying agents and ICSDs – Recap on
disclosure to asset servicers
 A12 Pre-sounding, bookbuilding and
allocations – Explanation
 A13 Selling restrictions (UK & EEA
Prospectus Directive) – Standard language
 A14 Sovereign bonds – Standard language
(English/NY CACs and Pari Passu)
 A15 Stabilisation materials – Explanation
& standard forms/language
 A16 Sub-€100,000 denomination bonds in
the EEA and retail cascade legends –
Explanation & standard language
 A17 Withholding tax and EU Savings Tax
Directive – Explanation & standard
language
Handbook – 2015 remodeling
 Root & branch review (since 2010/2011),
with publication in September
 Mainly cosmetic re-organisation into userfriendly / streamlined chapters and
appendices; addition of a glossary and
reader’s guide; consolidation of scope
provisions; also allowing for more discrete
future amendment (right hand
annotations); Table of destinations
 But two conceptual developments: (i)
Invitation telex  ‘Confirmation to
Managers’ (no acceptance concept) that
(ii) follows ‘Initial Syndicate
Communication‘ (information prospective
manager would reasonably expect to be
informed of prior to pricing / its name
being publicly associated with a deal); (iii)
scope extended to covered bonds
 Some ‘Spring cleaning’ (pruning less
relevant or now obvious material):
• Deletions –Some provisions relating to
retention; Most of the invitation
checklist/detail (App. 6A and 6B); Equity
selling restrictions; Minimum
denominations; Force Majeure Clause 1
(and ‘FM2’ just ‘FM’); 3rd party contract
rights; Printing of definitives; Semipermanent globals; Force Majeure sidearrangements; DMO £ calculations; €
conventions; Press Statement 1 (Post-Blue
Arrow); Fungible issues (no dis-application
of ‘clear water’ taps Rec.)
• Updates – ECP documentation; ratings
disclosure language; documentation
circulation timelines; Correcting EN XIII
typo (moving #18 up behind #16)
• Promotions/demotions/mergers – Various
things promoted to Recommendations
(“should” / e.g. GN4 on due diligence),
vice/versa and/or merged (no substantive
impact)
 Unrelated amendments: Stabilisation
materials; Retail cascade language; Final
terms (UKLA); Selling restrictions;
Sovereign CACs (existing public material)
 Unchanged: auditor letters, information to
agents/ICSDs and AAM (revamp pending)
ICMA staff contacts
 ICMA Legal & Regulatory Helpdesk
• Telephone: +44 20 7213 0341 (London) / +41 44 360 5237 (Zurich) / +852 2531 6590 (Hong
Kong)
• E-mail: legalhelpdesk@icmagroup.org (legal enquiries) / regulatoryhelpdesk@icmagroup.org
(market practice and regulatory policy queries)
• http://www.icmagroup.org/legal1-2/icma-legal-and-regulatory-helpdesk-2/
 Staff finder – See “Contacts” box at http://www.icmagroup.org/Regulatory-Policy-andMarket-Practice/
 Primary markets generally (inc. ICMA Primary Market Handbook)
• Ruari Ewing: +44 7213 0316 / ruari.ewing@icmagroup.org
• Charlotte Bellamy: +44 20 7213 0340 / charlotte.bellamy@icmagroup.org
Thank you
Any further questions?