An EMTN Programme is a framework documentation allowing repeat issuers to issue debt securities in a very short timeframe. Our Capital Markets team presents a four-point focus to understand the benefits of an EMTN Programme.
1. What is an EMTN Programme?
Legal nature of EMTNs
Securities issued under a Euro Medium Term Notes (EMTN) Programme are usually notes or bonds (obligations).
EMTN characteristics
An EMTN Programme allows the issuance of notes with a wide range of characteristics:
- medium or long-term maturity (market average of 5 to 10 years);
- in any currency (euro, dollar, pound sterling, yen, RMB, etc.);
- interest rate: fixed, floating (Euribor, CMS, SONIA, SOFR, etc.), fixed to floating, indexed to an underlying, zero coupon, etc.;
- dematerialised or materialised notes, in bearer or registered form (fully or administered);
- possibility to include early redemption events at the option of the issuer and/or the noteholders;
- with or without an offer to the public subject to the requirement to publish a prospectus and/or an admission to trading on a regulated market;
- in the context of a syndicated or non-syndicated issue;
- under French law or any other law;
- etc.
2. Who are the players?
Issuer
An EMTN Programme is an appropriate tool for frequent issuers with significant financing needs or who regularly access the market (credit institutions, large companies, local authorities, public institutions, etc.).
Arranger and Permanent Dealers
The Issuer usually appoints a bank as Arranger to arrange the setting-up and annual update of its EMTN Programme. The Arranger is also responsible for liaising between the Issuer and the Permanent Dealers appointed under the Programme.
Other players
Other players include:
- the agents (Fiscal Agent, Paying Agents, Calculation Agent, etc.);
- the law firms (usually one for the Issuer and one for the Arranger and the Dealers);
- the competent authority responsible for approving the Base Prospectus of the Programme (the Autorité des marchés financiers in France, the Commission de surveillance du secteur financier in Luxembourg, etc.);
- the stock exchange (Euronext Paris, Luxembourg Stock Exchange, etc.);
- the Issuer’s statutory auditors; and/or
- the rating agencies.
3. What is the documentation of an EMTN Programme?
What is the format of the documentation?
As part of an EMTN Programme, a specific documentation is put in place to give the Issuer significant flexibility to take advantage of market opportunities as and when they arise. An EMTN Programme includes a framework documentation, which is updated annually and is supplemented by issue-specific documentation for each issue. Once the Programme is in place, Issuers can issue notes within a very short timeframe (a few days) and on the basis of a light documentation, whether it is an offer to the public subject to the requirement to publish a prospectus, an admission to trading on a regulated market or a private placement.
Framework documentation
The framework documentation, which is updated annually, includes:
- a Base Prospectus: this is the only document to be approved by the competent authority. It contains in particular the legal terms and conditions (in the form of options) of the notes that may be issued under the EMTN Programme and a presentation of the Issuer (activities, financial statements, risk factors, etc.), the latter of which may be incorporated by reference, in particular if the Issuer has a Universal Registration Document;
- a Dealer Agreement governing the relationship between the Issuer, the Arranger and the Dealers; and
- a Fiscal Agency Agreement governing the relationship between the Issuer and the agents appointed by the Issuer (Fiscal Agent, Paying Agents, Calculation Agent).
Issue documentation
The issue-specific documentation, prepared for each “draw” under the Programme, includes:
- Final Terms, the form of which is taken from the Base Prospectus. They set out the specific terms and conditions of the issue (among the options available in the Base Prospectus) and the pricing elements. They are filed with the competent authority but do not need to be approved; and
- in the case of a syndicated issue: a Subscription Agreement, the form of which is attached to the Dealer Agreement, governing the relationship between the Issuer and the Dealers appointed to place the notes of the relevant issue. This agreement essentially refers to the Dealer Agreement and is therefore brief; or
- in the case of a non-syndicated issue: a Trade Confirmation, sent by the Dealer to the Issuer containing the pricing elements and the Dealer's underwriting commitment, and an Issuer's Confirmation sent by the Issuer to the Dealer to formalise the parties’ agreement on the principle and terms and conditions of the issue. If a Dealer is not a party to the Dealer Agreement, it joins the Programme by signing a Dealer Accession Letter. Forms of these documents are attached to the Dealer Agreement.
4. What information is provided to the market in an EMTN Programme?
Minimum information
The level of information that the Issuer must provide to the market under its EMTN Programme is determined by Regulation 2017/1129 of the European Parliament and the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, known as the Prospectus Regulation, supplemented by delegated acts and technical standards (ESMA).
This information includes:
Target market
The information contained in the Base Prospectus benefits from a simplified format if the notes have a nominal value of at least €100,000 (notes intended for the wholesale market, as opposed to notes intended for retail investors).
Update of information
The Base Prospectus:
- is valid for 12 months from the date of its approval by the relevant competent authority; and
- must be updated by way of a supplement in the event of a significant new factor, material mistake or material inaccuracy which may affect the assessment of the notes.
Our Capital Markets team has been involved in the setting-up and updating of numerous EMTN Programmes. We manage more than 20 Programmes for corporates, credit institutions and public entities and have been involved in numerous issues under these Programmes (over €150 billion issued since 2011), either as legal adviser to the Issuer or legal adviser to the Arrangers and the Dealers.
Need advice on setting up or updating an EMTN Programme? Please contact us!
