Carlos Juarez

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Structuring a transaction that addresses an issuer’s capital structure, including its debt obligations, financial and other covenant limitations, and debt maturity profile, involves compromise in some cases. An appropriate liability management transaction that considers the issuer’s objectives and also provides sufficient incentives for existing security holders can be a delicate balancing exercise.

The topic is timely as in the years following the financial crisis, low interest rates lead issuers to take on cheap debt, with some later refinancing through liability management transactions. Debt management exercises are expected to increase in the years to come.

In the International Financial Law Review‘s publication, Structuring Liability Management Transactions, Mayer Brown lawyers provide a summary of the US legal framework, including guidance provided in numerous no-action letters issued over many years, applicable to debt repurchases, tender offers and exchange offers. They also present some of the main regulatory and tax considerations that should be taken into account when determining the best approach.

To download a copy of the publication, please click here.  If you or your colleagues would like hard copies of the publication, please click here. 

Thursday, September 20, 2018
11:00 a.m. – 11:30 a.m. EDT

On July 31, 2018, after a review period following its initial proposal, the Office of the Comptroller of the Currency (OCC) announced it would begin accepting applications for its special purpose national bank charter for financial technology (fintech) companies. While the New York State Department of Financial Services has (again) sued the OCC claiming that it lacks the legal authority to issue this type of charter, companies are actively exploring the OCC fintech charter as well as other bank charter alternatives, such as industrial loan companies (ILCs), to facilitate their nationwide operation. Because many of these companies want to avoid owning a “bank” and being regulated as a bank holding company, there is a particular interest in those depository institutions excluded from the Bank Holding Company Act’s definition of “bank.”

Please join Mayer Brown partners Tom Delaney, Jeff Taft and Don Waack as they answer:

  • What are the potential advantages and disadvantages of an OCC fintech charter?
  • What are the alternative banking charters, such as ILCs, credit card banks and full-service insured depository institutions?
  • What is a “bank holding company”? (And why you may want to avoid this status.)

For more information, or to register for this complimentary session, please visit the event website.

Thursday, September 13, 2018
3:00 p.m. – Registration
3:30 p.m. – Roundtable discussion
5:00 p.m. – Networking drinks

Location
Thomson Reuters
3 Times Square
New York, NY 10036

Please join Mayer Brown at IFR’s US ECM Roundtable 2018.  Now in its seventh year, the event will bring together a panel of the most senior ECM practitioners to assess the current state of the market, discuss the latest trends and developments and provide an outlook for the remainder of the year and beyond.

Partner Anna Pinedo joins as a panelist for IFR’s event. Topics for discussion will include:

  • The state of the IPO market,
  • Private capital to public markets,
  • JOBS Act 3.0,
  • SPACs as an alternative to IPO,
  • Areas of success, and
  • Convertible bond market renaissance.

The event is free to attend but you must be registered. To secure your place, please visit IFR’s registration page.

Since the financial crisis, the IPO market has been somewhat volatile, but in the last few quarters, the market has shown growth. A recent Audit Analytics report notes a number of factors that may contribute to the relatively slow rate of growth of the IPO market, including the abundant availability of private capital (both equity and, increasingly, debt), the overcorrection of the market for historically high IPO valuations, and M&A exits.

Based on data provided in the report, there have been 1,758 IPOs since 2008. 66% of these IPOs were completed after the enactment of the Jumpstart Our Business Start Ups (JOBS) Act.  At the time of this post, there have been 27 IPOs withdrawn in 2018, according to Nasdaq.  The report also notes that there has been a 46% decline in the number of SEC registrants.

Both regulators and Congress have taken steps to ease the burden of accessing the public capital markets.  For example, the report highlights the expanded ability to submit draft registration statements confidentially to all companies, which took effect in July 2017.  Based on Audit Analytics data, the report noted that EGCs made up 70% of all IPOs in the first quarter of 2017, and now EGCs make up almost 90% in 2018.  IPO costs are one of the main reasons for companies deferring their IPOs.

Shifting focus to unicorns, Audit Analytics reported that these companies, which are valued at over $1 billion, made up only 7% of all IPOs in the first quarter of 2018.  In 2017, 10 unicorns went public, which represented 2% of all IPOs completed and in 2016, 11 unicorns went public, representing 5% of all IPOs.

Audit Analytics also looked at total IPO proceeds raised by year, as shown above.  Post JOBS Act, IPO proceeds seemed to steadily increase and then dropped again significantly in 2015 and 2016.  Based on their data, the report notes that the second and third quarters are the strongest for IPO activity, which leads us to believe that 2018 will finish on a positive trajectory.

Read Audit Analytics’ full report for more.

On Thursday, August 23, 2018, the Senate Committee on Banking, Housing, and Urban Affairs approved by unanimous voice vote the nomination of Elad Roisman for Commissioner of the Securities and Exchange Commission.

Nominated on June 1, 2018, by President Trump, Mr. Roisman would fill the vacancy created by former Commissioner Michael Piwowar’s resignation and serve a term of five years. Mr. Roisman is President Trump’s fourth nomination to the SEC, following the nominations of SEC Chair Jay Clayton, Commissioner Hester Peirce, and Commissioner Robert Jackson.

A date for a full Senate confirmation has yet to be set.

As we previously blogged, Nasdaq Stock Market LLC filed a proposed rule change with the Securities and Exchange Commission to change their listing requirements under Nasdaq Rule 5635(d), which relates to shareholder approval.

On August 16, 2018, the SEC announced that it would further extend its deadline to approve or reject the rule change to October 18, 2018, or 240 days from the date the proposed rule change was published for notice and comment in the Federal Register. The SEC noted that it would use the action deadline extension to review the proposed change and the comment letters it has received.

The Securities and Exchange Commission’s Investor Advisory Committee has released the agenda for its upcoming meeting on September 13, 2018.  The committee will begin with a discussion on U.S. proxy voting infrastructure.  The Committee will then address the SEC’s proposed transaction fee pilot in National Market System (NMS) stocks, which, as the agenda notes, may also include a recommendation from the Committee’s Market Structure Subcommittee.  Finally, the Committee will discuss the implications of passive investing.

The meeting will begin at 9am ET and will be held at the SEC’s headquarters.  The meeting is open to the public and will also be webcast on the SEC’s website.

2018 has seen an increase in private companies accessing the private markets through private company liquidity programs.  Nasdaq Private Markets recently released a report showing an increase of 74% in total number of private liquidity programs between 1H2017 and 1H2018.  The 33 programs completed in the first half of 2018 have a total program volume of $10 billion.  This is a 37% increase in total program volume over the first half of 2017.  Twenty of these private liquidity programs were structured as third-party tender offers, while the remaining 13 were share buybacks.

Breaking down the programs by number of eligible shareholders shows that 33% of programs are completed by companies with less than 100 eligible shareholders, 33% by companies with 100-250 eligible shareholders, 24% by companies with 250-500 eligible shareholders, and 10% by companies with over 500 eligible shareholders.  Additionally, 50% of companies completing private liquidity programs are valued at over $1 billion.  Nasdaq’s report leads us to conclude that a broader range of companies have turned to private liquidity programs than in recent years.

Nasdaq’s report is available here.

 

Fintech companies continue the global trend of companies choosing to remain private longer and raising large amounts of capital through private channels.  A recent CB Insights report covered the financing trends of fintech companies for the first half of 2018.  As of the date of the report, there were 29 fintech unicorns valued at $84.4 billion globally.  The second quarter of 2018 valued five fintech companies at unicorn status (over $1 billion).  Three of these new unicorns are based in the United States.

U.S. fintech companies raised $3.2 billion in new capital over 146 deals in the second quarter of 2018, bringing the total number of deals for the first half of the year to 303, raising approximately $5.3 billion.  Compared to Q2 2017, last quarter’s total capital raised increased over 52%.  Not surprisingly, later-stage capital raises made up over 83% of deals in the second quarter, raising approximately $2.7 billion over 74 deals.

There was only one IPO exit by a fintech unicorn in the U.S. in the second quarter of 2018, which raised $874 million.  Globally, M&A exits accounted for approximately 85% of fintech company exits, with 39 M&A transactions, while there were only seven fintech IPOs completed in the first half of 2018.

For more information, read CB Insights’ Global Fintech Report Q2 2018.

Large, late stage private capital raises for privately held companies continue to be the preferred method of financing growth for many new companies, particularly those in the tech sector.  A recent analysis conducted by data provider CB Insights examined what the industry calls “mega-deals” or “private-IPOs,” which are private placements raising over $100 million in proceeds.  These deals, which have a median deal size of $160 million, have largely contributed to the emergence of unicorns, or private companies valued at over $1 billion.  This trend in private capital raising has become more prevalent since the enactment of the JOBS Act in 2012, which has made it easier for companies to remain private longer.

A closer look at the data compiled by CB Insights shows that, over the last five years in the United States, over 90% of capital raises for private companies were later stage or mezzanine investments.  These deals have raised over $300 billion in capital for companies, with $151.7 billion of these deals fitting into the rubric of “private-IPOs.”  Based on the CB Insights analysis, it would appear that transaction volumes for 2018 are on pass to surpass those in 2017.  While legislators contemplate the capital formation-focused package of legislation that has been dubbed “JOBS Act 3.0,” and consider measures to make going public more compelling, it’s clear that there is no shortage of private capital to finance promising companies.