Bondholder Communications, a New York-based company that specialises in locating and communicating with the beneficial owners of a company's bonds, has established its first Asian operation in Hong Kong.
"We fill a market niche," says Elizabeth Wilson, Hong Kong-based managing director at Bondholder Communications. "We are a full-service organisation. We aren't hired just to identify bondholders, we proactively communicate with them, facilitate voting and support transaction execution all the way through to settlement."
Wilson says the company is typically hired by financial advisors, legal counsel or trustees to coordinate with bondholders during tender or exchange offers, consent solicitations and restructurings.
According to Wilson, clearing systems were developed as a mechanism for tracking trading and liquidity, not for communicating with investors. This has resulted in a 'funnel problem' where one has to steer through a maze of up to five or six ownership layers to identify the ultimate bondholders.
"We have built up relationships with the clearing systems and have worked with them for years," she explains. "We're on a first name basis with back office personnel at all of the major custodian banks as well as at Euroclear and Clearstream. In fact, they attended our opening party here in Hong Kong a few months ago. Their participants pay attention when they see a notice come through from us."
Wilson says she can locate a company's bondholders in one to three weeks.
As part of its transaction-related services, BondCom also runs an innovative on-line voting site. "This saves on time and costs involved in printing and mailing and also allows us to follow up on any mistakes, thereby preserving votes," says Wilson. The system also allows issuers to monitor the voting status as often as they like.
"A recent high-profile transaction we worked on was the Marconi Scheme of Arrangement," she adds. "BondCom's first Asian transaction was Guangdong Enterprises, China's first Western-style restructuring."
However, it was involvement in the APP China restructuring deal that prompted BondCom to set up shop in the region.
"At the moment, we see the most potential for our services in Asia on the distressed side. We can add value by working together with advisors to communicate with bondholders in distressed situations earlier on, before the company reaches a default stage," says Wilson.
In addition to APP, BondCom's mandates in Asia include some restructurings in the Philippines. So far, Wilson has seen most interest from Taiwan, mainland China, Australia and Indonesia. She recently hired a Japanese speaking associate to join the team and is looking to add more associates with Asian language abilities.
She emphasises however, that her services are also useful for healthy companies. "We can help them communicate with bondholders for purposes of an early redemption or if their credit has improved and they need to waive a covenant to issue additional debt at a lower interest rate."
Wilson herself has dealt with bond transactions from a variety of perspectives, initially as a lawyer with White & Case, during which she interfaced with BondCom on the Guangdong Enterprises transaction and also with UBS as a legal advisor to its Asian debt capital markets group.