Snapshot: Regulating High Yield Debt in Switzerland

Regulation

Disclosure requirements

Describe the disclosure requirements applicable to high yield debt financings. Is there a particular regulatory body that reviews or approves these disclosure requirements?

Disclosure of a high yield bond offering tends to be governed by international (especially US) law and practice. Swiss law does not affect the normal practice of marketing high yield bonds. The Swiss Financial Services Act aims to align with the EU Prospectus Regulation and recognizes the “Wholesale Debt Exemption” (for bonds with a face value of at least 100,000 Swiss francs ).

In addition, high yield bonds are generally listed outside of Switzerland, so no listing prospectus is required in Switzerland.

Product use

Are there any limits on the use of proceeds from an issue of high yield securities by an issuer?

The Use of Proceeds section generally provides that the Proceeds will be used outside of Switzerland, except to the extent that use in Switzerland is permitted by Swiss tax laws without the High Yield Bond payments being subject to withholding or a deduction for Swiss withholding tax. as a result of such use of the product in Switzerland.

Investment Restrictions

On what grounds, if any, could an investor be prevented from investing in high yield securities?

Many European-based investors can only invest in listed securities. Accordingly, the listing is sought to accommodate these investors even though the offering of high yield bonds is made on a private placement basis and the secondary market is essentially “over-the-counter”.

The distribution of high yield bonds will generally target large institutional investors, as evidenced by high minimum cut and sell restrictions.

Certain categories of potential investors, such as insurance companies and Swiss pension funds, may be subject to restrictions in the composition of their assets which may be used to cover their contingent liabilities and may guide their investment decision. .

Closing mechanics

Are there any particular closing mechanisms in your jurisdiction that a high yield debt issuer should be aware of?

The closing of a high yield bond offering by a Swiss group generally takes place in the normal way.

The bonds or notes are issued in the form of global certificates deposited with a common depositary on behalf of Euroclear and Clearstream.

In acquisition financing, the structural security package (e.g., pledge over shares and any intercompany loans; pledge over receivables under the SPA) is put in place at closing while the “hard” security package (at the target level) will be implemented after closing (eg assignment of trade receivables, control agreement over bank accounts, intellectual property and – subject to tax considerations – real estate).

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