The Eurobond market has existed for 45 years and its infrastructure reflects that. Bondholder trustees are gearing up to change one aspect that should improve their ability to obtain bondholder agreements. The present system – if it can be called a system – requires bondholders to receive 21 days’ notice of a meeting, which might or might not be quorate. If it is not quorate, another 14 days must elapse before another meeting can take place. The method through which bondholders are notified is equally antiquated. Investors are informed via newspaper adverts or through clearing agents.
"If the Eurobond markets were starting today the system would not operate as it does now. We are not saying it’s broken, we are saying it needs improving," says Olufemi Oye, director, Deutsche Bank, Trust & Securities services, and co-chair of the ESF trustee committee.
What is being proposed is complementary to what exists now in the trustee deed. The new idea would simply allow trustees to have an alternative method of notifying and voting that could be used in situations where there is a need to get bondholders’ opinions quickly.
"We’ve identified situations where a trustee needs quicker action than can currently be achieved," says Oye.