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Accessing the U.S. Capital Markets ACCESSING THE U.S. CAPITAL MARKETS SECURITIES PRODUCTS An Introduction to United States Securities Laws This and other volumes of Accessing the U.S. Capital Markets have been prepared by Sidley Austin LLP for informational purposes only, and neither this volume nor any other volume constitutes legal advice. The information contained in this and other volumes is not intended to create, and receipt of this or any other volume does not constitute, a lawyer-client relationship. Readers should not act upon information in this or any other volume without seeking advice from professional advisers. Sidley Austin LLP, a Delaware limited liability partnership which operates at the firm’s offices other than Chicago, London, Hong Kong, Singapore and Sydney, is affiliated with other partnerships, including Sidley Austin LLP, an Illinois limited liability partnership (Chicago); Sidley Austin LLP, a separate Delaware limited liability partnership (London); Sidley Austin LLP, a separate Delaware limited liability partnership (Singapore); Sidley Austin, a New York general partnership (Hong Kong); Sidley Austin, a Delaware general partnership of registered foreign lawyers restricted to practicing foreign law (Sydney); and Sidley Austin Nishikawa Foreign Law Joint Enterprise (Tokyo). The affiliated partnerships are referred to herein collectively as “Sidley Austin LLP,” “Sidley Austin” or “Sidley.” This volume is available electronically at www.accessingsidley.com. If you would like additional printed copies of this volume, please contact one of our lawyers or our Marketing Department at 212-839-5300, e-mail: [email protected]. For further information regarding Sidley Austin, you may access our web site at www.sidley.com Our web site contains address, phone and e-mail information for our offices and attorneys. Attorney Advertising. For purposes of compliance with New York State Bar rules, Sidley Austin LLP’s headquarters are 787 Seventh Avenue, New York, NY 10019, 212-839-5300 and One South Dearborn, Chicago, IL 60603, 312-853-7000. Prior results described herein do not guarantee a similar outcome. INTRODUCTION SIDLEY AUSTIN LLP TABLE OF CONTENTS ACCESSING THE U.S. CAPITAL MARKETS — SECURITIES PRODUCTS Page INTRODUCTION .......................................................................................................................................................1 CHAPTER 1 U.S. IPOS OF COMMON EQUITY SECURITIES ..............................................................................2 CHAPTER 2 DEPOSITARY RECEIPTS (ADRS AND GDRS) ..............................................................................14 CHAPTER 3 CONVERTIBLE AND EXCHANGEABLE SECURITIES................................................................28 CHAPTER 4 HYBRID CAPITAL SECURITIES .....................................................................................................44 CHAPTER 5 HIGH YIELD DEBT SECURITIES....................................................................................................50 CHAPTER 6 MEDIUM-TERM NOTES...................................................................................................................69 CHAPTER 7 STRUCTURED NOTES......................................................................................................................76 CHAPTER 8 COMMERCIAL PAPER .....................................................................................................................88 CHAPTER 9 EXTENDIBLE NOTES .......................................................................................................................97 CHAPTER 10 ASSET-BACKED SECURITIES ....................................................................................................102 CHAPTER 11 COVERED BONDS ........................................................................................................................119 CHAPTER 12 TRADITIONAL PRIVATE PLACEMENTS..................................................................................134 GLOSSARY ..........................................................................................................................................................139 APPENDIX A U.S. TAX CONSIDERATIONS FOR NON-U.S. ISSUERS ACCESSING THE U.S. CAPITAL MARKETS .....................................................................................................................A-1 APPENDIX B BASIC DOCUMENTS FOR SECURITIES OFFERINGS IN THE U.S. CAPITAL MARKETS.......................................................................................................................................B-1 © Sidley Austin LLP — August 2009 INTRODUCTION SIDLEY AUSTIN LLP INTRODUCTION This is one of three volumes of our 2009 edition of Accessing the U.S. Capital Markets and focuses on securities products commonly used in the U.S. capital markets. The other two volumes of Accessing the U.S. Capital Markets focus on the U.S. offering and listing process for, and the U.S. securities and other laws that apply to, foreign private and governmental issuers (the Non-U.S. Issuers volume) and U.S. issuers (the U.S. Issuers volume), respectively. This Securities Products volume is intended to be used with both. It may also be used separately as a guide to issues arising in connection with the offering of the securities products discussed herein. Each securities product chapter in this volume assumes information that is set out in the other volumes of Accessing the U.S. Capital Markets. The public issuance of common stock that is discussed in Chapter 1, for example, requires the preparation of disclosure, the compliance with registration procedures, the negotiation of certain agreements and attention to other matters that are not discussed, or are discussed only briefly, in this book. In this volume, we have focused on the matters that are distinctive to specific securities products. We have also included, in Appendix A (U.S. Tax Considerations For Non-U.S. Issuers Accessing the U.S. Capital Markets) of this volume, a discussion of the U.S. tax considerations that foreign private issuers should consider when issuing securities in the U.S. capital markets. None of the securities product chapters in this volume are intended to be exhaustive reviews of all issues relating to the securities products discussed. Each securities offering is made in the context of particular facts and circumstances that will impact the characteristics of the securities being offered. For advice on particular securities products, please contact a Sidley lawyer. Sidley Austin LLP August 2009 1 © Sidley Austin LLP — August 2009 CHAPTER 1 — U.S. IPOS OF COMMON EQUITY SECURITIES SIDLEY AUSTIN LLP CHAPTER 1 U.S. IPOS OF COMMON EQUITY SECURITIES GENERAL...................................................................................................2 STRUCTURING ISSUES................................................................................3 OFFERING SIZE AND PRICE RANGE............................................................7 UNDERWRITERS’ OVER-ALLOTMENT OPTION...........................................8 CHEAP STOCK...........................................................................................8 LOCK-UP AGREEMENTS ............................................................................8 SELLING SHAREHOLDERS ..........................................................................9 DIRECTED SHARE PROGRAMS ...................................................................9 LIMITATIONS ON PUBLICITY....................................................................10 BASIC DOCUMENTS .................................................................................11 GENERAL This chapter focuses on selected issues that confront an issuer making its initial public offering (“IPO”) of common equity1 in the U.S. capital markets. An IPO typically involves registering the common equity securities with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933 (the “1933 Act”), offering the securities through underwriters and listing the securities on a U.S. securities exchange.2 The matters addressed in this chapter differ, and may not apply at all, if the issuer’s IPO is made outside the United States and the U.S. component of the offering is exempt from registration under the 1933 Act or the issuer’s common shares (or American Depositary Receipts (“ADRs”) representing those shares) are already listed on a U.S. securities exchange. This chapter also does not address other types of common equity transactions such as the issuance of stock pursuant to employee stock option plans or venture capital, private equity transactions, private offerings in the U.S. capital markets as part of IPOs listed outside the United States, or rights offerings. Although the primary purposes of most equity offerings are to increase equity and raise funds, issuers may raise equity in the capital markets for other reasons. An IPO of common equity in the U.S. capital markets may: • create greater access to a market in which the issuer can raise debt or additional equity on an ongoing basis; • increase equity to improve credit ratings or reduce leverage; 1 In the United States, these securities are denominated by state corporation laws as common stock or common shares. Outside the United States, this type of equity security may be referred to as “ordinary stock” or by other terminology. In this volume, for convenience, we refer to this category of equity securities as common equity
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