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Global Depository Receipts & American Depository Receipts

Global Depository Receipts & American Depository Receipts. Practical aspects of the issuance. International fund raisings. Equity issuance through GDRs & ADRs. Debt issuance in the Eurobond markets. GDRs & ADRs - Main advantages. Diversify the shareholder base.

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Global Depository Receipts & American Depository Receipts

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  1. Global Depository Receipts & American Depository Receipts Practical aspects of the issuance

  2. International fund raisings • Equity issuance through GDRs & ADRs. • Debt issuance in the Eurobond markets.

  3. GDRs & ADRs - Main advantages • Diversify the shareholder base. • Take advantage of the depth in the international markets. • Increases the profile of the companies due to the international attention and coverage. • Able to raise funds in foreign currency. • Quick liquidity for the shareholders. • Get better valuations for the home market listed stock of the issuer.

  4. GDRs & ADRs – How to do an issue? • Company should be convinced of the need to raise equity from the international markets. • Start consultations with investment banks. (Goldman Sachs, Morgan Stanley, Merril Lynch, Lehman Brothers, HSBC, Deutche Bank etc) • Give a mandate to the investment bank to be the Lead Manager of the issue. • Lead Manager would give a timetable for the issue.

  5. GDRs/ ADRs – How to do an issue? (cont’d) • Lead Manager would prepare a research report covering the company’s activities and the prospects for the shareholders. • Lead Manager prepares the company’s key staff (CEO, CFO) for the road show in international markets. Typically London, Frankfurt, Paris, New York, Singapore etc. • Lead Manager starts the book building process during the road show. (book building is a process which determines the price of the GDR or ADR)

  6. GDRs/ ADRs – How to do an issue? (cont’d) • The price is fixed and the funds are raised. • Listing of the GDR is done in the London or Luxembourg stock exchange. ADRs are listed in the New York stock exchange. • GDRs & the ADRs start trading in the overseas markets. • Company submits returns regularly to the overseas stock markets to comply with listing requirements.

  7. Eurobond Issue to raise Debt • The name Eurobond denotes that the bond is raised in an international market outside of the U.S. and can be done in any currency. • The bond would be listed in the Luxembourg or London Stock Exchanges. • The bond could be raised either under a Medium Term Note (MTN) programme or a single issuance of an FRN. (Floating/fixed rate note).

  8. Eurobond Issue – Advantages • Diversify the funding base to different markets. New depositors and different profile of depositors. (pension funds, insurance companies, banks etc) • To tap the huge liquidity available in the foreign markets. • Helps the profile of the issuer as an international player.

  9. Eurobond Issue – How to do it? • Engage an investment bank as the lead manager. • Since this is a debt issue a rating agency (Moodys’, Standard & Poors, Fitch) would need to rate the bond. • Lead Manager prepares the offering circular.

  10. Eurobond Issue – How to do it? (cont’d) • Engage an investment bank as the lead manager. • Since this is a debt issue a rating agency (Moodys’, Standard & Poors, Fitch) would need to rate the bond. • Lead Manager prepares the offering circular. • Typically the lead manager would also do a credit research report for the investors.

  11. Eurobond Issue – How to do it? (cont’d) • Lead Manager prepares the company for the road show and the road show is completed. • During the road show the lead manager does the book building for the bond. • Based on the book building the price is fixed and the issue is done at the price fixed. • The company gets the funds and the bonds are listed.

  12. Thank You For clarifications please contact: gopakumar@bankmuscat.com

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