Corporate Actions

What are corporate actions?

Anything an issuer publicly announces related to a Eurobond is called a corporate action. An announcement can usually be picked up through a custodian sending a notification or the general press.

What are buy-backs?

Issuers may announce a change to the structure of a bond they issued. In most times this involves the buy-back of a Eurobond to reduce the amount outstanding in the secondary market. Possible reasons for an issuer to buy back (part of) a Eurobond in the secondary market may be the utilization of surplus cash, the existence of alternative and/or cheaper funding sources or the preference of a different borrowing structure in terms of tenor.

What are tenders?

One of the most common corporate actions are tenders, where an issuer announces to buy-back (part of) a Eurobond in the secondary market. Investors are normally informed through a notice from their custodian or a public media source. The tender notice will disclose the price the issuer proposes the buy the bond back at, the amount it is willing to accept and a deadline until when investors can offer their holdings.

What are taps?

The opposite, of a buy-back is a “tap”. A tap is when an issuer simply wishes to increase the amount outstanding of a Eurobond. A tap usually results in a newly issued Eurobond with the same characteristics as the already outstanding Eurobond. The tap will merge into the previously issued bond after a few months of issuance. An issuer mainly taps a Eurobond when there is a need to borrow more funds at the same terms as the already outstanding Eurobond and a strong indication of increased investor appetite exists.