High-yield bond issuance: how to avoid 5 common pain points

September 3, 2024

When it comes to issuing high-yield bonds, corporations and their lawyers know that the road isn’t always easy. Surprises, inefficiencies and delays can complicate even the best laid plans. Read about five common pain points and ways to mitigate them.

The U.S. and EU high-yield markets – essential sources of funding for issuers looking to raise money – are in a state of constant evolution. Deals these days are moving faster. Timelines are getting shorter. And activity is starting to rebound after an extended period of sluggish volatility.

In this fast-paced world of high yield, you need a trustee and agency partner that can act quickly. When the clock is ticking, you want a team that can mobilize their resources to meet tight deadlines and help you avoid needless delays and complications.

In this article, we’ll discuss five frequently encountered obstacles and ways you can bypass them.

1. Know your customer (KYC) and onboarding delays

Today’s KYC rules often create labor-intensive tasks within an onboarding checklist. A tenured team understands exactly what documentation they need for compliance. Obtaining everything upfront – at the start of the process – reduces inefficient back-and-forth requests that add work and that place additional demands on your time.

Sophisticated onboarding systems and experienced teams can help create a seamless integration, so you don’t have to worry about delays or missing deadlines. A technology-focused provider will have a robust framework to check, monitor and assess risk during the onboarding process in an efficient fashion. They’re able to examine potential issues and develop flexible solutions that adapt as needs evolve while remaining compliant with policies and regulations. This can produce faster turnarounds and smoother interaction overall.

2. Miscommunication between parties

When too many parties are involved, coordinating efforts becomes difficult. Gaps in communication can occur, and responsibilities can be overlooked. To streamline the process, look for a comprehensive, full-service partner who can provide a full range of services and act in multiple roles. A multi-functional trustee can deliver operational efficiencies, opportunities for cost reduction and a more integrated onboarding experience.

To ease the burden of managing several parties in your transaction, consider a single partner that can fill multiples roles, including but not limited to:

  • Indenture trustee
  • Collateral agent
  • Security trustee
  • Registrar, transfer agent and paying agent
  • Calculation agent
  • Common depository
  • Settlement agent
  • Facility agent
  • Conversion/exchange agent

3. Inefficient, non-commercial document review

Delays and complications arise if your service provider doesn’t understand their roles. They can lose sight of a customer's goals or get bogged down in trivial matters. You want a partner that smoothly and efficiently moves the process forward without creating unnecessary friction.

Client managers should have the expertise and awareness to know when – and just as importantly, when not – to make changes. You want revisions to be prompt, pertinent and helpful to avoid slowing the whole process down.

“On one hand, you don’t want document review to be too fast and careless,” says Shawn Goffinet, vice president of business development at U.S. Bank Global Corporate Trust – U.S. “On the other hand, you don’t want it to be too slow, tedious and overdone. You want to find the perfect ‘Goldilocks’ balance of thorough and efficient – a team that clearly understands the intent of what you’re trying to accomplish and works to that end.”

4. Temporary financing (or “bridge loans”)

Occasionally, you may need to secure temporary financing – a short-term loan – to bridge the period of time between when you announce an acquisition and when you issue the bond. This can be done for a variety of reasons, often to buy time when the market is volatile. The process adds extra layers of risk and complexity, and you need a facilitator with experience and a thorough understand of all the steps involved.

“At U.S. Bank, we can act as the security agent and facility agent, serving as the liaison between the borrower and the lender,” says Rosie Brooke-Taylor, vice president of business development at U.S. Bank Global Corporate Trust – Europe. “Our experience, track record and flexibility make us especially well-suited for these types of complex transactions.”

5. Jurisdictional limitations

The U.S. and the EU have separate and distinct clearing systems. The U.S. uses the Depository Trust Clearing Corporation (DTCC), and the EU uses Euroclear and Clearstream. This can create difficulties if you want to issue a tranche of U.S. dollar and euro notes. Using a trustee with multi-currency capabilities and a presence in both jurisdictions, however, should make this a non-issue.

“No two transactions are alike, so having global partners that can meet U.S and European requirements is key to staying nimble and avoiding headaches,” says Rosie. “The best trustees prioritize proactiveness, responsiveness and flexibility to ensure you’re able to get what you need when and how you need it.”


At U.S. Bank, we have the experience, reach and technology to navigate the mechanics of complex deals with transparency, consistency and unwavering quality. As new opportunities emerge in the European high-yield landscape, we can help you understand some of the new legal and structural hurdles in this fast-paced market.

For more information about our U.S. trustee solutions, visit our website or contact Shawn Goffinet at shawn.goffinet@usbank.com.

 

For more information about our European trustee solutions, visit our website or contact Rosie Brooke-Taylor at rosie.brooketaylor@usbank.com.

Related content

4 questions you should ask about your custodian

The unsung heroes of exchange-traded funds

The secret to successful service provider integration

Start of disclosure content

Disclosures

U.S. Bank Global Corporate Trust is a trading name of U.S. Bank Global Corporate Trust Limited, U.S. Bank Trustees Limited and Elavon Financial Services DAC (each a U.S. Bancorp group company). U.S. Bank Global Corporate Trust Limited is a limited company registered in England and Wales having the registration number 05521133 and a registered address of 125 Old Broad Street, Fifth Floor, London, EC2N 1AR. U.S. Bank Global Corporate Trust Limited, Dublin Branch is registered in Ireland with the Companies Registration Office under Reg. No. 909340 with its registered office at Block F1, Cherrywood Business Park, Cherrywood, Dublin 18, Ireland D18 W2X7. U.S. Bank Trustees Limited is a limited company registered in England and Wales having the registration number 02379632 and a registered address of 125 Old Broad Street, Fifth Floor, London, EC2N 1AR. Elavon Financial Services DAC (a U.S. Bancorp Company), trading as U.S. Bank Global Corporate Trust, is regulated by the Central Bank of Ireland.  Registered in Ireland with the Companies Registration Office, Reg. No. 418442. The liability of the member is limited. Registered Office: Block F1, Cherrywood Business Park, Cherrywood, Dublin 18, Ireland D18 W2X7. Directors: A list of names and personal details of every director of the company is available for inspection to the public at the company’s registered office for a nominal fee. In the UK, Elavon Financial Services DAC trades as U.S. Bank Global Corporate Trust through its UK Branch from its establishment at 125 Old Broad Street, Fifth Floor, London, EC2N 1AR (registered with the Registrar of Companies for England and Wales under Registration No. BR020005). Authorised and regulated by the Central Bank of Ireland. Authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority.  Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. In Luxembourg, Elavon Financial Services DAC trades as U.S. Bank Global Corporate Trust through its Luxembourg Branch under RCS number B244276 with its registered office at 4, rue Albert Borschette, L-1246 Luxembourg, and is regulated and authorised by the Central Bank of Ireland (CBI) as well as by the Commission de Surveillance du Secteur Financier (CSSF). Details about the extent of our authorisation and regulation by the CBI and the CSSF are available from us on request.

All banking services are provided through Elavon Financial Services DAC. U.S. Bank Global Corporate Trust Limited and U.S. Bank Trustees Limited are Trust Corporations and not banking institutions and are not authorised to carry on banking business in the United Kingdom, Ireland or any other jurisdiction.

U.S. Bank National Association is not responsible for and does not guarantee the products, services, performance or obligations of its affiliates.

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.