Accessing the U.S.

Market to Raise Capital

Presentation:
March 13, 2013

Topics for presentation

Capital-raising alternatives, including:
Institutional private placements (Section 4(a)(2) offerings)
Rule 144A offerings
Section 3(a)(2) offerings
Covered bond offerings
Registration process for registered offerings

Capital-raising alternatives
Types of issuances

Senior unsecured debt

Senior secured debt (including covered bonds)
Subordinated debt
Structured debt (e.g., equity-linked and commodity-linked notes)
Hybrid debt / preferred stock
Contingent capital (coco) debt
Deposit liabilities

Issuing entities
Home offices
US branches
Other affiliated entities (e.g., financing SPVs)

Financing continuum
Private Offering

U.S. private
placement
(insurance
or debt
private
placement)

Less Liquid
Less time-consuming

Public Offering

144A offering
Tranche from
a EMTN or
GMTN
Standalone
144A
144A
program

SEC Registration
OR
3(a)(2) Offering
(for banks)
3(a)(2)
standalone
3(a)(2) program

Liquid
More time-consuming
4

Institutional Private Placements

(4(a)(2) Offerings)

What is a private placement?

An offering of debt to US investors under Section 4(a)(2) of the US
Securities Act of 1933, which permits a transaction by an issuer not
involving any public offering
Key factors for qualification include investor sophistication, limited
number of offerees and lack of widespread marketing
Result of qualification: not required to register securities with the US
Securities and Exchange Commission (SEC) meaning not subject
to SEC filing and disclosure rules (other than anti-fraud rules)
Sometimes referred to as a Reg D which is actually only
applicable in the case of a Regulation D filing

Who invests in private placements?

Most investors are US financial institutions
Insurance companies are most common
In some cases, non-US (particularly UK) investors may participate
Pool of prospective investors has gotten larger

Private placement process

Standardized documentation
Model X Forms
Most transactions are documented pre-marketing
U.S. governing law (usually NY); English law has become an option
Term sheets vary in detail

Individual investor decisions no agent bank equivalent

Due diligence confidentiality preserved given limited number of potential
investors
Bilateral negotiations pre-circle via placement agent(s)
Monitoring of the investment post-closing

Role and Benefits of Appointing Specialized

Issuer Counsel
Market expectation/desire
Issuer can better control drafting of principal documentation
Provides issuer with objective, current market and legal expectations
Effectively represents the Issuers interests during pre-documentation
Smoother, more efficient transaction process

Role of Pre-Designated US Investor Counsel

U.S. Special Counsel for Investors
Experienced U.S. special counsel usually pre-designated by issuer with advice
from placement agents and issuer special counsel
Pre-marketing phase
Reviews term sheet and, sometimes, issuers bank facility
Advocates for the market on documentation and structural issues
Identifies potential investor resistance points (structure, documentation or
commercial) for the issuer and the placement agent to evaluate before going to
the market (pick your battles)

Marketing phase
Responds to inquiries from prospective investors regarding the term sheet, the
proposed Note Purchase Agreement, the issuers bank facility and other aspects of
the transaction
Identifies important issues that arose in the pre-marketing documentation phase

Post-circle phase
Negotiate final changes in documentation (if any)
10

Role of non-US Counsel

Home Jurisdiction Counsel or Other Local Counsel for Investors
Generally not required if issuer is advised by reputable firms with experience in the
cross-border debt markets

11

Laws and Governmental Regulations

Issuers jurisdiction of organization
Withholding taxes and treaties
Registration duties
Legal restrictions on types of securities
Currency and Payment Regulations (if any)

US
Securities laws
Securities Act of 1933
Securities Exchange Act of 1934
Sarbanes-Oxley Act (not applicable to foreign issuers or their lawyers unless
filing with the SEC)

Insurance laws and regulations

Legal investment requirements
NAIC ratings and reserve requirements

12

Laws and Governmental Regulations (contd)

ERISA (if any U.S. operations)
Financial impact of unfunded or termination liabilities for employee benefit plans
Prohibited transaction restrictions

Use of proceeds
U.S. margin regulations
Foreign Corrupt Practices Act
Financing terrorists (or other enemies)
Foreign Assets Control Regulations

U.S. Patriot Act and related Executive Orders

13

Significant covenants
Model X Forms
Financial information and reasonable access to management and auditors
Housekeeping covenants
Maintenance of pari passu ranking of Notes and any guarantees
Change in nature of business
Arms length affiliate transactions
Mergers, consolidations, amalgamations

Other Restrictive Covenants

Financial covenants usually based upon covenant package in existing bank facility
(if any)

Limitation on priority debt (structural subordination)

Subsidiary external borrowings
Secured debt
Sale and leasebacks

14

Significant covenants (contd)

Asset dispositions
Emergence of Most Favored Lender provisions
Effect of GAAP/IFRS changes

15

Development of Model X Forms

Almost total market acceptance of the Model Forms
Streamlines documentation process (template)
Investors focus on departures from relevant Model Form and substantive issues
that are outside the form (primarily covenant package)

Cross-border adaptation of Model Forms

Model X Form adopted in September 2004
Based upon updated Model Form No. 2
Surprisingly few changes from domestic version, with particular emphasis on taxrelated issues and certain hot button topics such as compliance with new U.S.
anti-terrorism regulations
Easily adaptable to multi-currency transactions and investor swap arrangements re
non-USD tranches
Model Forms X-1 and X-2 adopted in 2006

Current Ongoing Project to update all Model Forms

16

Key investor objectives

Buy and Hold: Notes are expected to be held to maturity
No withholding tax
Secure, predictable return to match portfolio liabilities
Relationship investors

17

Transaction chronology
Potential issuer, working with the placement agents, produces an
Offering Memorandum (Memorandum)
Memorandum contains Term Sheet and, usually, draft of Note Purchase
Agreement

Deal is marketed to investors, often through a roadshow

Issuer and investors agree a final Note Purchase Agreement
Issuer sells Notes to investors

18

Documentation
Note Purchase Agreement
Notes
Guarantee Agreement (Parent)
Guarantee Agreement(s) (Subsidiaries)

19

The Note Purchase Agreement (NPA)

Based on relevant standard Model X Form
Model Form created by the Transactions Process Management
Committee of the American College of Investment Counsel

20

NPA: Key provisions

Representations and warranties by Issuer, including:
Due organization/authorization
Financial statements
Compliance with law and regulations (including environmental)
Tax compliance
ERISA compliance
Use of proceeds (important to investors to know where the money is going)
Compliance with anti-terrorism laws (investment cannot legally be made otherwise)
Pari passu

Purchaser representations (source of funds must also comply with

ERISA)

21

NPA: Key provisions (contd)

Information requirements
Financial statements (annual and semi-annual, IFRS or GAAP)
Other reports
Default notices/other notices
Compliance certificate
Inspection rights (Why? Investors have come to expect these of all investments)

Prepayment
Required prepayments
Prepayment with make-whole or modified make-whole
Swap breakage (used only if investors are swapping)

Affirmative Covenants (what issuer will do)

Compliance with law
Insurance, properties
Taxes
Corporate existence
Pari Passu
22

NPA: Key provisions (contd)

Negative covenants (what issuer will NOT do)
Financial covenants (e.g. interest and debt coverage, net worth)
Negative pledge
Sale of assets
Merger or consolidation
Transactions with affiliates
Subsidiary debt

Events of default
Failure to pay
Covenant breaches
Cross-defaults

Tax gross-up or interest adjustment

Note payments must be free of withholding tax

23

NPA: Key provisions (contd)

Remedies on default
Registration/exchange/substitution of notes
Payments on Notes; Expenses
Amendment and waiver
Governing law and jurisdiction
Issuer must agree to use New York law and to give New York courts jurisdiction
Appointment of agent for service in New York State
Possible use of English law

Defined terms (including financial terms)

24

Rule 144A Offerings

25

Why are Rule 144A offerings attractive?

Rule 144A provides a clear safe harbor for offerings to institutional
investors.
Does not require extensive ongoing registration or disclosure
requirements.
Index eligible issuances have good liquidity in the Rule 144A
market.

26

Rule 144A overview

Rule 144A provides a non-exclusive safe harbor from the registration
requirements of Section 5 of the Securities Act for resales of
restricted securities to qualified institutional buyers (QIBs).
The rule recognizes that not all investors are in need of the
protections of the prospectus requirements of the Securities Act.
The rule applies to offers made by persons other than the issuer of
the securities. (i.e., resales).
The rule applies to securities that are not listed on a U.S. securities
exchange or quoted on an automated inter-dealer quotation system.
A reseller may rely on any applicable exemption from the registration
requirements of the Securities Act in connection with the resale of
restricted securities (such as Regulation S or Rule 144).

27

Types of Rule 144A offerings

Rule 144A offering for an issuer that is not registered in the U.S.
usually a standalone Rule 144A offering
Rule 144A continuous offering program
Used for repeat offerings, often by financial institution and insurance company
issuers, to institutional investors.
Often used for structured products and for covered bonds sold to QIBs.

If you have a Global Medium-Term Note Program or Euro MTN

program in place, you can update your program to tack on or add
the capability to offer securities on a 144A basis

28

How are Rule 144A offerings structured?

The issuer initially sells restricted securities to investment bank(s)
as initial purchasers in a Section 4(a)(2) or Regulation D private
placement.
The investment bank reoffers and immediately resells the
securities to QIBs under Rule 144A.
Often combined with a Regulation S offering.

29

How are Rule 144A offerings conducted?

Often similar to a registered offering.
Road show with a preliminary offering memorandum.
Confirmation of orders with the final offering memorandum.
The offering memorandum may be delivered electronically.

The purchase agreement is executed at pricing, together with the

delivery of a comfort letter.
Closing on a T+3 basis, or as otherwise agreed with the investors.
Publicity: generally limited to a Rule 135c compliant press release
limited information about the offering.

30

Rule 144A Offering Memorandum

May contain similar information to a full S-1/F-1 prospectus, or may be
much shorter.
If the issuer is a public company, it may incorporate by reference the
issuers filings from its home country.
Scope of disclosure (whether included or incorporated by reference) may be
comparable to a public offering, as the initial purchasers/underwriters expect
10b-5 representations from the issuer, and legal opinions from counsel.
Due diligence by counsel will often be similar to that performed in a public
offering.
For a non-U.S. offering, with a Rule 144A tranche, there may be a U.S.
Rule 144A wrapper attached to the non-U.S. offering document (such as a
UKLA or Luxembourg approved prospectus)

31

Documentation for a Rule 144A offering

Offering memorandum or offering circular
A purchase agreement between the issuer and the initial
purchasers/underwriter(s)
Similar to an underwriting agreement in terms of representations, covenants,
closing conditions and indemnities.

Legal opinions
10b-5 negative assurance letters
Comfort letters

32

Documentation for a 144A MTN program

Offering memorandum
Program agreement
Agency agreement
Legal opinions, 10b-5 negative assurance letters and comfort letters
required at the time program is established and from time to time
thereafter

33

The JOBS Act and marketing Rule 144A

offerings
The JOBS Act requires the SEC to adopt rules to permit general
solicitations in connection with Rule 144A offerings, provided that
sales are made solely to QIBs.
The SEC issued proposed rules on August 29, 2012 and the
comment period ended on October 5, 2012. The SEC has not
issued final rules at this time.
Potential impact:
Use of additional offering modalities to market transactions and disseminate
information.
For example, public websites that describe the offering and press releases.

34

Conditions for Rule 144A offering

Reoffers or resales only to a QIB, or to an offeree or purchaser that
the reseller reasonably believes is a QIB.
Reseller must take steps to ensure that the buyer is aware that the
reseller may rely on Rule 144A in connection with such resale.
The securities reoffered or resold (a) when issued were not of the
same class as securities listed on a U.S. national securities
exchange or quoted on a U.S. automated inter-dealer quotation
system and (b) are not securities of an open-end investment
company, UIT, etc.
For an issuer that is not an Exchange Act reporting company or
exempt from reporting pursuant to Rule 12g3-2(b) under the
Exchange Act, the holder and a prospective buyer designated by the
holder must have the right to obtain from the issuer, upon the
holders request, certain reasonably current information.
35

Rule 159: Time of Sale Information

Although Rule 159 under the Securities Act is not expressly
applicable to Rule 144A offerings, many investment banks apply
the same treatment, in order to help reduce the risk of liability.
Use of term sheets and offering memoranda supplements, to
ensure that all material information is conveyed to investors at the
time of pricing.
Counsel is typically expected to opine as to the disclosure
package, as in the case of a public offering.

36
NY2 632073

Section 3(a)(2) Offerings

37

Section 3(a)(2) and Offerings by Banks

Section 3(a)(2) of the Securities Act exempts from registration under
the Securities Act any security issued or guaranteed by a bank.
Basis: banks are highly regulated, and provide adequate disclosure
to investors about their finances in the absence of federal securities
registration requirements. Banks are also subject to various capital
requirements that may increase the likelihood that holders of their
debt securities will receive timely payments of principal and interest.

38

What is a bank?
Under Section 3(a)(2), the institution must meet both of the following
requirements:
it must be a national bank or any institution supervised by a state banking
commission or similar authority; and
its business must be substantially confined to banking.

Examples of entities that do not qualify:

Bank holding companies

Finance companies
Investment banks
Foreign banks

39

Guarantees
Another basis for qualification as a bank: securities guaranteed by a
bank.
Not limited to a guaranty in a legal sense, but also includes arrangements in
which the bank agrees to ensure the payment of a security.
The guaranty or assurance of payment, however has to cover the entire
obligation; it cannot be a partial guarantee or promise of payment.
Again, guarantees by foreign banks (other than those of an eligible U.S. branch or
agency) would not qualify for this exception.
The guarantee is a legal requirement to qualify for the exemption; investors will
not be looking to the US branch for payment/credit. Investors will look to the
home office.

40

Non-U.S. Banks/U.S. Offices

U.S. branches/agencies of foreign banks are conditionally entitled to
rely on the Section 3(a)(2) exemption.
1986: the SEC takes the position that a foreign branch/agency will
be deemed to be a national bank or a banking institution
organized under the laws of any state if the nature and extent of
federal and/or state regulation and supervision of that particular
branch or agency is substantially equivalent to that applicable to
federal or state chartered domestic banks doing business in the
same jurisdiction.
As a result, U.S. branches/agencies of foreign banks are frequent
issuers or guarantors of debt securities in the U.S. Most issuances
or guarantees occur through the NY branches of these banks.

41

Non-U.S. Banks/U.S. Offices (contd)

Examples of Issuing Entities:
U.S. branch as direct issuer: UBS, CS, NAB, CBA and ANZ
U.S. branch as guarantor, headquarters as issuer: BNP, Rabo, SocGen,
Svenska
U.S. branch as guarantor, SPV/Cayman branch as issuer: Fortis, BNP
More banks are using a guarantee structure to allow greater flexibility for use of proceeds.

Which Regulator?
Most U.S. branches of foreign banks have elected the N.Y. State Banking
Commissioner as their primary regulator with their secondary regulator the
Federal Reserve.
Some U.S. branches have opted for the Office of the Comptroller of the
Currency (OCC) as their primary regulator.

42

OCC Registration/Disclosure
National banks or federally licensed U.S. branches/agencies of foreign
banks regulated by the Office of the Comptroller of the Currency (the
OCC) are subject to OCC securities offering (Part 16) regulations.
Part 16 of OCC regulations provides that these banks or banking offices
may not offer and sell their securities until a registration statement has been
filed and declared effective with the OCC, unless an exemption applies.
An OCC registration statement is generally comparable in scope and detail
to an SEC registration statement; as a result, most bank issuers prefer to
rely upon an exemption from the OCCs registration requirements. Section
16.5 provides a list of exemptions, which includes:
Regulation D offerings
Rule 144A offerings

43

Part 16.6 of the OCC Regulations

12 CFR 16.6 provides a separate partial exemption for offerings of
non-convertible debt to accredited investors in denominations of
$250,000 or more.
National banks with foreign parents that have shares traded in the
US may be able to rely upon this exemption by furnishing the foreign
private issuer reports (Forms 20-F, 6-K) filed by foreign issuers.
Alternatively, Federal branches/agencies may rely on this exemption
by furnishing to the OCC parent bank information which is required
under Exchange Act Rule 12g3-2(b), and to purchasers the
information required under Securities Act Rule 144A(d)(4)(i).

44

Denominations
The 3(a)(2) exemption does not require specific minimum
denominations in order to obtain the exemption.
Many state-chartered branches of foreign banks issue/sell in
denominations of $1000
However, for a variety of reasons, denominations may at times be
significantly higher than in retail transactions:
Offerings targeted to institutional investors.
Complex securities.
Relationship to 16.6s requirement of $250,000 minimum denominations.

45

Deposits versus other liabilities

Foreign banks may elect to issue debt instruments in the form of
deposit liabilities as opposed to pure debt:
Yankee CDs (US$-denominated deposit liabilities of a foreign bank or its US
branch).
Other types of deposits (e.g., structured deposits).

What are the legal differences between deposit liabilities and other
debt issuances?
In the case of foreign banks, less than meets the eye.
Foreign banking organization (FBO) deposit liabilities are not insured and
generally are issued in large denominations (minimum $100,000 and usually
higher).
For capital equivalency/asset segregation purposes, deposits and non-deposit
liabilities generally are treated in the same manner.

46

Blue Sky regulation

Securities issued under Section 3(a)(2) are considered covered
securities under Section 18 of the Securities Act.
As a result, blue sky filings are not needed in any state in which the
securities are offered.

47

FINRA requirements
Even though securities offerings under Section 3(a)(2) are exempt
from registration under the Securities Act, public securities offerings
conducted by banks must be filed with the Financial Industry
Regulatory Authority (FINRA) for review under Rule 5110(b)(9),
unless an exemption is available.
Transactions under Section 3(a)(2) must also be reported through
FINRAs Trade Reporting and Compliance Engine (TRACE).
TRACE eligibility provides greater transparency for investors.
Currently, Rule 144A securities are not TRACE reported.

48

Exchange Act reporting

Section 12(i) of the Exchange Act provides that the administration
and enforcement of Exchange Act Sections 12, 13, 14(a), 14(c),
14(d), 14(f), and 16 is vested in the OCC with respect to national
banks, the Federal Reserve Board as to member banks of the
Federal Reserve System, the FDIC as to all other insured banks,
and the OTS as to savings associations.
As a result, a bank that otherwise would be subject to Exchange Act periodic
reporting requirements would submit its reports to the appropriate banking agency,
and not to the SEC.

49

Exchange Act reporting (contd)

Foreign banks are not Section 3(a)(2) banks and therefore are not
subject to Exchange Act Section 12(i), but to the extent they
otherwise are required to register under the Exchange Act as issuers,
or submit reports as foreign private issuers, they would register and
file their reports with the SEC.
U.S. branches/agencies of foreign banks would not be subject to
Exchange Act Section 12(i) requirements solely by virtue of their
issuance of debt securities.

50

Section 3(a)(2) offering documentation

The offering documentation for bank notes is similar to that of a
registered offering.
Base offering document, which may be referred to as an offering
memorandum or an offering circular (instead of a prospectus).
The base document is supplemented for a particular offering by one
or more pricing supplements and/or product supplements.
These offering documents may be supplemented by additional
offering materials, including term sheets and brochures.
A purchase agreement (for a standalone offering), or a program
agreement (for a 3(a)(2) program)
A fiscal and paying agency agreement

51

Comparison of Section 3(a)(2) to Rule 144A

Section 3(a)(2)

Rule 144A

Required issuer:

Need a US state or federal licensed bank as issuer or as

guarantor

No specific issuer or guarantor is required

Exemption from the

Securities Act:

Section 3(a)(2)

Section 4(a)(2) / Rule 144A

FINRA Filing
Requirement:

Subject to filing requirement and payment of filing fee

Not subject to FINRA filing

Blue Sky:

Generally exempt from blue sky regulation

Generally exempt from blue sky regulation

Listing on an
exchange:

May be listed if issued in compliance with Part 16.6

No

Restricted

No; considered public and therefore eligible for bond

indices, TRACE reporting

Yes

52

Comparison of Section 3(a)(2) to Rule 144A

(contd)
Section 3(a)(2)

Rule 144A

Required
governmental
approvals:

Banks licensed by the OCC are subject to the Part

16.6 limitations, unless an exemption is available.

Generally none.

Permitted Offerees:

All investors, which means that there is a broader

market. However, banks licensed by the OCC are
subject to the Part 16.6 limitations, unless an
exemption is available. Generally, sales to accredited
investors.

Only to QIBs. No retail.

Minimum
denominations:

All denominations. However, banks licensed by the

OCC are subject to minimum denomination
requirement.

No minimum denominations requirement.

Role of
Manager/Underwriter:

Either agented or principal basis.

Must purchase as principal.

40 Act:

Banks not considered investment companies.

Foreign banks will want to review 40 Act guidance.

Non-bank issuer should consider whether there is a 40

Act issue.

Settlement:

Through DTC, Euroclear/Clearstream.

Through DTC, Euroclear/Clearstream

53

3(a)(2) Issuances (2011- 2013)

Pricing Date
1/7/2013
1/7/2013
11/8/2012
11/8/2012
11/2/2012
11/2/2012
10/17/2012
9/4/2012
8/10/2012
8/8/2012
7/26/2012
7/26/2012
7/10/2012
7/10/2012
7/10/2012
6/6/2012
3/28/2012
3/16/2012
3/5/2012
3/1/2012
3/1/2012
2/1/2012
1/17/2012
1/11/2012
7/20/2011
7/5/2011
5/24/2011
4/20/211
4/14/2011
4/6/2011
3/22/2011
2/17/2011
1/25/2011
1/25/2011
1/12/2011
1/4/2011
1/4/2011

Issuer
Intesa SanPaolo Spa (New York)
Intesa SanPaolo Spa (New York)
American Express Centurion Bank
American Express Centurion Bank
Rabobank Nederland
National Bank of Canada
PNC Bank NA
Australia & New Zealand Banking Group (New York)
UBS AG (Stamford)
National Australia Bank Ltd
National Australia Bank (New York)
National Australia Bank (New York)
Sumitomo Mitsui Banking Corp
Sumitomo Mitsui Banking Corp
Sumitomo Mitsui Banking Corp
TCF National Bank
Svenska Handelsbanken AB
National Australia Bank Ltd
Commonwealth Bank of Australia (New York)
National Australia Bank (New York)
National Australia Bank (New York)
Rabobank Nederland
First Republic Bank
Rabobank Nederland
Rabobank Nederland
Svenska Handelsbanken AB
BNP Paribas SA
BNP Paribas SA
Rabobank Nederland
BNP Paribas (New York)
UBS AG (Stamford)
BNP Paribas SA
UBS AG (Stamford)
UBS AG (Stamford)
BNP Paribas (New York)
Rabobank Nederland
Rabobank Nederland

Ratings (M/S)
Baa2/BBB+
Baa2/BBB+
A2/AA2/AAa2/AAAa2/A
A3/AAa2/AA-/BBBAa2/AAAa2/AAAa2/AAAa3/A+
Aa3/A+
Aa3/A+
Baa1/BBBAa3/AAAa2/AAAa2/AAAa2/AAAa2/AAAa2/AABaa3/BBB
Aa2/AAAa2/AAAa3/AAA2/A+
A2/A+
Aa2/AAA2/A+
A2/A
A2/A+
A2/A
A2/A
A2/A+
Aa2/AAAa2/AA-

Coupon (%)
3.125
3.875
0.875
3mL+45bp
3.950
1.450
2.700
1.875
7.625
2.000
3mL+113bp
1.600
1.350
1.800
3.200
6.250
2.875
3mL+1bp
1.950
2.000
2.750
3.875
6.700
3.375
3mL+20bp
3.125
3.250
3.250
3mL+35bp
5.000
3mL+40bp
3.250
2.250
3mL+100bp
5.000
1.850
4.500

Tranche Value (US$mm)

2,000
1,500
750
550
1,500
750
1,000
750
2,000
13
500
1,250
1,000
1,250
750
110
1,250
175
2,000
1,500
1,000
3,000
200
2,500
360
1,250
100
150
350
1,000
300
100
1,000
750
2,000
1,250
1,500

Structure
3YR FXD
5YR FXD
3YR FXD
3YR FRN
10YR FXD
5YR FXD
10YR FXD
5YR FXD
10YR FXD
5YR FXD
3YR FRN
3YR FXD
3YR FXD
5YR FXD
10YR FXD
10YR FXD
5YR FXD
3YR FRN
3YR FXD
3YR FXD
5YR FXD
10YR FXD
Perpetual
5YR FXD
2YR FRN
5YR FXD
4YR FXD
4YR FXD
3YR FRN
10YR FXD
2YR FRN
4YR FXD
3YR FXD
3YR FRN
10YR FXD
3YR FXD
10YR FXD

Maturity Date
1/15/2016
1/16/2018
11/13/2015
11/13/2015
11/9/2022
11/7/2017
11/1/2022
10/6/2017
8/17/20222
8/10/2017
8/7/2015
8/7/2015
7/18/2015
7/18/2017
7/18/2022
6/8/2022
4/4/2017
3/20/2015
3/16/2015
3/9/2015
3/9/2017
2/8/2022
Perpetual
1/19/2017
7/25/2013
7/12/2016
3/11/2015
3/11/2015
4/14/2014
1/15/2021
9/25/2012
3/11/2015
1/28/2014
1/28/2014
1/15/2021
1/10/2014
1/11/2021

Deal Nationality
Italy
Italy
US
US
Netherlands
Canada
US
Australia
Switzerland
Australia
Australia
Australia
Japan
Japan
Japan
US
Sweden
Australia
Australia
Australia
Australia
Netherlands
US
Netherlands
Netherlands
Sweden
France
France
Netherlands
France
Switzerland
France
Switzerland
Switzerland
France
Netherlands
Netherlands

Note: Shading denotes Yankee issuance; list is comprehensive but may not capture every 3(a)(2) issuance in 2011-13; 3(a)(2) issuances are
unsecured

54

Specific Offering Types

55

Foreign bank issuances of covered bonds

Foreign banks issuing into the U.S. market have been relying on their
domestic covered bond framework and have been using cover pool
assets that are foreign (not in the U.S.).
Issuances into the U.S. have been structured as program issuances
(or syndicated takedowns) conducted on an exempt basis, that
means that the foreign issuer is relying on exemptions from the U.S.
securities laws requiring registration of public offerings of securities.
To date, only one issuer (RBC) has registered a covered bond with
the SEC. It is expected that other foreign issuers will follow suit.
As a result, offerings have been targeted at U.S. institutional
investors and generally conducted in reliance on Rule 144A.

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Foreign bank issuances of capital securities

A number of jurisdictions within Europe have provided guidance to
their financial institutions relating to the type of instruments eligible
for Tier 1 or Tier 2 treatment, including contingent capital.
Issuances into the U.S. of contingent capital securities have been
structured as 144A or 3(a)(2) offerings into the U.S.
U.S. investors have demonstrated interest in contingent capital
instruments, as well as in Tier 2 instruments.

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Issuances of structured securities

Many foreign banks establish issuance programs (either relying on
Rule 144A or 3(a)(2)) that permit them to access U.S. investors to
offer structured products
Structured products may include equity-linked, index-linked, interest
rate-linked, commodity-linked or currency-linked notes
Some foreign banks also issue Yankee CDs (or certificates of
deposit) from their U.S. branches; Yankee CDs may (or may not) be
subject to FDIC insurance

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Registered Offerings:
Non-U.S. Issuers Offer
Securities as Foreign Private Issuers

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What is a Foreign Private Issuer?

An FPI is any issuer (other than a foreign government) incorporated or
organized under the laws of a jurisdiction outside of the U.S., unless
more than 50% of the issuers outstanding voting securities are held
directly or indirectly by residents of the U.S., and any of the following
applies:
The majority of the issuers executive officers or directors are U.S. citizens or
residents;
The majority of the issuers assets are located in the U.S.; or
The issuers business is principally administered in the U.S.

An FPI will be subject to the reporting requirements under U.S. federal

securities laws if it registers with the SEC the public offer and sale of
its securities under the Securities Act.
However, an FPI may also deregister more easily than a domestic
issuer.
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Benefits available to FPIs

An FPI may exit (or deregister) the U.S. reporting regime more
easily than a U.S. issuer.
Quarterly reports: An FPI is not required to file quarterly reports
submits its non-U.S. reports under cover of Form 6-K.
Proxies: An FPI is not required to file proxy statements.
Ownership reporting: No Section 16 (short-swing profits) reporting.
Governance: An FPI may choose to rely on certain home-country
practices.
XBRL: Temporary XBRL relief was previously granted to FPIs.
Internal controls: Annual internal control reporting
Executive compensation: As an FPI, certain of the more onerous
executive compensation disclosure requirements are not applicable
IFRS without GAAP reconciliation
12g3-2(b) exemption
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Registration Process

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Which registration form should be used?

Once an FPI has been subject to the U.S. reporting requirements for
at least 12 calendar months, it may use Form F-3 to offer securities
publicly in the United States.
Form F-3 is a short-form registration statement (analogous to Form S-3 for U.S.
domestic issuers) and may be used by an FPI if the FPI meets both the forms
registrant requirements and the applicable transaction requirements.
Form F-3 permits an FPI to disclose minimal information in the prospectus
included in the Form F-3 by incorporating by reference the more extensive
disclosures already filed with the SEC under the Exchange Act, primarily in the
FPIs most recent Annual Report on Form 20-F and its Forms 6-K.
Form F-3s filed by WKSIs are automatically effective, without SEC review.
Shelf registration statements on Form F-3 are typically not reviewed.

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What is a WKSI?
A well-known seasoned issuer (WKSI) is an issuer that has at least $700
million of common equity held by non-affiliates or (b) issued $1 billion of nonconvertible securities during the past three years.
Can be a U.S. issuer or a non-U.S. issuer.
Can be a subsidiary of a company that is a WKSI.
Subject to certain disqualifications.

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Automatic Shelf Registration Statements

Automatic, immediate effectiveness, without SEC review
Registration of unspecified amounts of specified classes of securities
Presumption of proper form
Process and consequences of notification by Staff if SEC objects to use of form

Impacts form of underwriting agreement, opinions and other offering

documents.
Omission of information from base prospectus
Identification of primary or secondary offering
Description of securities
Names of selling security holders
Plan of distribution

Mechanics for including omitted information

Limited requirements for post-effective amendments

Pay-as-you-go registration fees as an option

Unique to automatic shelf registrations
In whole or in part
Practical application in MTN programs and other special situations
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Ongoing Reporting
Obligations and Governance

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Ongoing reporting obligations

An FPI that has registered securities under Section 12(b) or 12(g) of
the Exchange Act or is required to file under Section 15(d) of the
Exchange Act (because it has recently completed a registered
offering) is obligated to file the following Exchange Act reports with
the SEC:
Annual Report on Form 20-F
Reports on Form 6-K

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Annual Report on Form 20-F

The information required to be disclosed in an Annual Report on
Form 20-F includes, but is not limited to, the following:

Operating results;
Liquidity and capital resources;
Trend information;
Off-balance sheet arrangements;
Consolidated financial statements and other financial information;
Significant business changes;
Selected financial data;
Risk factors;
History and development of the FPI;
Business overview; and
Organizational structure.

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Reports on Form 6-K

An FPI must also furnish reports on Form 6-K to the SEC from time
to time.
Generally, a Form 6-K contains information that is material to an
investment decision in the securities of an FPI.
May include press releases, securityholder reports and other materials that an
FPI publishes in its home-country in accordance with home-market law or custom,
as well as any other information that the FPI may want to make publicly available.

Reports on Form 6-K generally take the place of Quarterly Reports

on Form 10-Q (which include financial reports) and Current Reports
on Form 8-K (which include disclosure on material events) that U.S.
domestic issuers are required to file.
For many of the larger FPIs, the Forms 6-K that are filed with the SEC generally
include similar types of information and are filed with the same frequency as
Forms 10-Q and 8-K that are filed by U.S. domestic issuers.
The disclosures are prepared in accordance with home country practice.
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Sarbanes-Oxley requirements
Section 302 of Sarbanes-Oxley requires certifications by an FPIs
CEO/CFO regarding the effectiveness of the FPIs disclosure
controls and procedures, the completeness and accuracy of the
FPIs reports filed under Section 13(a) and 15(d) of the Securities
Act, and any deficiencies in, and material changes to, the FPIs
internal control over financial reporting.
Section 302 reporting begins once the FPI is an SEC registrant.
These certifications must be included in the FPIs Form 20-F.
Other reports filed or furnished by the FPI, such as reports on Form 6-K, are not
subject to the certification requirements.

Section 404 of Sarbanes-Oxley requires an annual report by both

management and external auditors regarding the effectiveness of
the companys internal controls over financial reporting.
Section 404 reporting begins with the second annual filing with the SEC.
FPIs that are non-accelerated filers do not have to provide the auditors
attestation.
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Disclosure controls and procedures

Disclosure controls and procedures are controls and other
procedures designed to ensure that the information required to be
disclosed in the reports filed under the Exchange Act, on a timely
basis, is recorded, processed, summarized and reported.
Disclosure controls and procedures include, but are not limited to,
controls and procedures designed to ensure that information
required to be disclosed by a company in its Exchange Act reports is
appropriately accumulated and communicated to the companys
management, including its principal executive and financial officers,
to allow timely decisions regarding required disclosure.
Important to have an up the chain process of reporting from lower
managers to CEO and CFO.

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Liability Concerns

72

Securities liability Rule 144A and

Section 3(a)(2)
Neither Rule 144A offerings or securities offerings of, or guaranteed
by, a bank under Section 3(a)(2) are subject to the civil liability
provisions under Section 11 and Section 12(a)(2) of the Securities
Act.
Rule 144A offerings and offerings under Section 3(a)(2) are subject
to Section 10(b) of the Exchange Act and the anti-fraud provisions of
Rule 10b-5 of the Exchange Act.
Impact on offering documents, and use of offering circulars to
convey material information and risk factors.

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Liability under the Exchange Act

Rule 10b-5 applies to registered and exempt offerings.
Rule 10b-5 of the Exchange Act prohibits:
The use of any device, scheme, or artifice to defraud;
The making of any untrue statement of a material fact or the omission of a material
fact necessary to make the statements made not misleading; or
The engaging in any act, practice, or course of business that would operate to
deceive any person in connection with the purchase or sale of any securities.

To bring a successful cause of action under Rule 10b-5, the plaintiff

must prove:
That there was a misrepresentation or failure to disclose a material fact,
That was made in connection with plaintiffs purchase or sale of a security,
That defendants acted with scienter, or the intent or knowledge of the violation,
That plaintiffs relied on defendants misrepresentation or omission, and
That such misrepresentation or omission caused plaintiffs damages.

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Section 11 liability registered offerings

Directors and officers of an FPI who sign a registration statement
filed in connection with a securities offering are subject to the liability
provisions of Section 11 of the Securities Act.
Section 11 of the Securities Act creates civil liability for
misstatements or omissions in a registration statement at the time it
became effective.
Any person that acquired a security registered under a registration statement, and
did not have knowledge of the misstatement or omission at the time of the
acquisition of the security, can bring suit against:
Every person who signed the registration statement, including the FPI;
Every director of the FPI at the time of the filing of the registration statement,
whether or not such director signed the registration statement; and
Experts who consent to such status, but only with respect to those sections of
the registration statement (e.g., auditors).

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Section 12 liability registered offerings

Section 12 of the Securities Act assigns liability to any person who
offers or sells a security in violation of Section 5 of the Securities Act
(pursuant to Section 12(a)(1)), or by means of a prospectus or oral
communication that includes a misstatement or omission of material
fact (pursuant to Section 12(a)(2)).
Plaintiffs bringing a claim under Section 12 are afforded rescissory
relief, if they still have ownership of the securities, or damages, if
they no longer own the security.
No action under Section 12(a)(1) may be brought more than three
years after the bona fide public offering of a security, or, in the case
of Section 12(a)(2), more than three years after the actual sale of a
security.

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