Deutsche Bank, Morgan Stanley & Co. International plc, Nomura International plc and Societe Generale, (the "Arrangers"), have responded to investors’ demands for standardisation of repackaging transactions by collaborating with international law firm Simmons & Simmons and a number of market-leading service providers to produce market-standard documentation for use in listed and unlisted repackaging transactions.
They have also established a centralised, free and accessible library of such documentation ("Standard Repackaging Documentation") which is available now at: http://www.standard-repack-documentation.com
The primary goal of the project is to establish an industry-standard approach to the documentation of repackaging transactions. Other eligible banks will be given the opportunity to participate in the future development of the documentation based on transparent, fair and non-discriminatory criteria to be determined.
Moreover, the Standard Repackaging Documentation clarifies the outcomes of certain important situations, for example, in the event of a default of the swap counterparty, the Standard Repackaging Documentation contains a pre-defined process by which another bank can step in as the new swap counterparty. This prevents early redemption of the securities and provides greater continuity for investors.
On behalf of the Arrangers, Pierre Lescourret, Global Head of Engineering for Equities & Equity Derivatives, Societe Generale Corporate & Investment Banking said: “This project aims to create a more efficient and transparent market for repackaging transactions by providing standardised contracts. Given the demand for yield in the current low rate environment, these products will be in demand. Standardised documentation will make it easier for institutional clients to invest.”
Repackaged products provide the investor exposure to the underlying credit of an issuer and are specifically designed for the investor’s risk-return needs. In addition, cash flows can be customised with respect to payment dates, currencies and rates with the involvement of a swap counterparty.
The Standard Repackaging Documentation will increase transparency and awareness of repackaging transactions. It will also reduce execution times and costs. Investors will be better able to compare securities issued or offered by different arranging banks, thereby increasing competition and choice. In addition, liquidity should improve in the secondary market.