Offshore Bond Repurchases: What Issuers Need To Know?

• Author: Hao Zhou,Michael Lu,Jason Kuo
• Published date: 29/07/2020
• Citation: jd0025
• Date: 29 July 2020
• Subject Matter: Banking & Finance

2020/9/10 Offshore Bond Repurchases: What Issuers Need To Know? | China Law Insight

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CHINA LAW INSIGHT

Offshore Bond Repurchases: What Issuers Need

To Know?

By King & Wood Mallesons on July 29, 2020

Summary

A corporate issuer of outstanding debt securities may from time to time seek to purchase

the relevant debt securities in the open market or through privately negotiated

transactions to reduce their principal amount outstanding. This is a popular liability

management method, particularly when the relevant securities are trading in the open

market at a price below the nominal value of their principal amount.

Repurchase of those securities at the then market price would allow the issuer to reduce

its indebtedness at lower costs than it would otherwise incur through a redemption of the

relevant securities at their par value.

Recently the trading value of debt securities issued by many corporate issuers within the

region, especially privately-owned entities, has significantly declined as a result of the

financial market shock caused by the COVID-19 pandemic. This article is intended to

provide a general introduction to the legal considerations that may be relevant for

corporate issuers in planning a repurchase of non-convertible bonds outside the United

States. However, each case is different. Issuers should consult with counsel, investment

bankers and other professional advisers to carry out a careful analysis of the factors

relating to the repurchase, such as applicable securities laws, tax regulations and

potential litigation risks, before commencing any repurchase.

U.S. federal securities regulations

US federal securities regulations have very broad reach, which may apply to transactions

conducted outside the territory of the United States. Purchases and sales of debt