Issuers not buying back bonds within a specified period is a growing concern among investors who are considering buying these securities. To protect future creditors, companies offer them additional collateral for issued debt instruments. However, establishing some security requires a lot of time. In the article published in “Parkiet” daily, Konrad Sobczyk suggests that a good interim solution might be to launch a so-called deposit mechanism. It involves a contract between the issuer and the collateral administrator. Also the book runner or deal coordinator, despite the lack of obligation, can, and in principle should take a position in this transaction as the entity connecting the investor with the issuer.
In June 2019, this mechanism was activated during the issue of bonds by FASING S.A. Group Capital Equipment and Tools Factory. The bond issue was coordinated by Haitong Bank and the legal advisor was the law firm Spaczyński, Szczepaniak i Wspólnicy Sp.k. Bonds with a nominal value of PLN 40 million were issued and at the issue date were partly secured through: a promissory note, a declaration of submission to enforcement and assignment of rights from insurance policies. In addition, the issuer made a commitment to set up a mortgage bond secured on real estate and a pledge on inventory and machinery in a timely manner.
Konrad Sobczyk’s article is also available online (Polish only).
