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COVID-19 Market Updates: Market practice
ICMA has been facilitating discussions among members on the impact of the COVID-19 pandemic on market practice. A summary of key points is set out below (so far relating only to primary markets). ICMA will continue to keep this page updated as developments and discussions continue.

12 May 2020:
ICMA Podcast - Electronic signings - an English law perspective in the time of COVID-19

ICMA has teamed up with Clifford Chance to make available a Clifford Chance podcast on electronic signings from an English law perspective in the time of COVID-19.

5 May 2020:
ICMA Podcast - COVID-19: ICMA Future Leaders legal working group perspectives

Capital markets lawyers and ICMA Future Leaders legal working group members Tom Capon (Chair of the working group) and Moeen Qayum speak with Charlotte Bellamy of ICMA to delve further into practical legal implications for European primary debt capital markets of the current COVID-19 pandemic, following on from last week’s podcast with Amanda Thomas and Jen Cresswell of A&O.

28 April 2020:
ICMA Podcast - COVID-19: Practical implications for European primary debt capital markets - a view from A&O

ICMA speaks to Amanda Thomas and Jennifer Cresswell of Allen & Overy LLP to get their perspective on the practical implications of COVID-19 for European primary debt capital markets, covering a wide range of issues from central bank asset purchase programmes to challenges around financial information, its preparation and publication, as well as the implications of remote working for executing documents, due diligence, disclosure, risk factors and more.

6 April 2020:
ICMA Quarterly Report Second Quarter 2020 - Impact of COVID-19 on primary markets

2 April 2020:
ICMA Podcast - Importance of the primary debt market and current conditions under COVID-19

Jean-Marc Mercier, Vice-Chairman of Capital Markets, HSBC and Deputy Chairman, ICMA, discusses the role of the primary markets in providing opportunities for issuers and investors, reviews how they are functioning in the COVID-19 environment, and highlights their importance in financing the real economy.

30 March 2020 (update from 23 March 2020): Bank of England addresses questions about the Covid Corporate Financing Facility (CCFF)

Following the announcement of the Bank of England’s Covid Corporate Financing Facility (CCFF) and in the interest of supporting the overall market, ICMA has made generally available to non-ICMA members the Euro commercial paper materials from the ICMA Primary Market Handbook previously available only to ICMA members.

The Bank of England has confirmed that it will accept commercial paper with standard features that is issued using ICMA market standard documentation. To support companies seeking to set up CP programmes quickly, the Bank will accept simplified versions of the commercial paper documentation, based on the ICMA standard, which are available on the Bank website (blacklined against the ICMA versions, where relevant) and encourages companies to use those pre-approved versions wherever possible.

The ICMA materials are:
  1. Appendix A7, Part I - Dealer Agreement;
  2. Appendix A7, Part II - Information Memorandum (not required for Bank of England CCFF Covid Corporate Financing Facility);
  3. Appendix A7, Part III - Global Note;
  4. MiFID II Product Governance and Euro Commercial Paper;
  5. Chapter 12 - ECP Recommendations;
  6. Chapter 2 - MTN Recommendations (cross-references from Chapter 12).
ICMA is considering the IBOR provisions in the standard form ICMA ECP Global Note.

Any related queries should be directed to LegalHelpdesk@icmagroup.org.

27 March 2020: Force majeure

ICMA has published a note on the ICMA standard force majeure clause and the COVID-19 pandemic. The two-page note discusses the intended use of the clause, historic use of the clause in practice and the application of the clause in the context of the COVID-19 pandemic.

It also notes that ICMA is not planning to make any changes to the clause and that, pursuant to Recommendation 10.1 of the ICMA Primary Market Handbook, documentation for a new bond issue that falls within the scope of the ICMA Primary Market Handbook should contain the ICMA force majeure clause.

27 March 2020: Auditors' comfort letters

The COVID-19 pandemic is likely to have an impact upon the ability of auditors to carry out audits as they normally would. It is also likely to impact upon the comfort letter that is typically provided to underwriters for new bond issues.  
On 21 March 2020, the UK FCA requested UK companies to delay the announcement of their preliminary financial statements for at least two weeks. On 26 March 2020, the UK FCA, FRC and PRA announced a series of actions to ensure information continues to flow to investors and support the continued functioning of the UK’s capital markets. This includes: (a) a statement by the FCA allowing listed companies an extra 2 months to publish their audited annual financial reports; (b) guidance from the FRC for companies preparing financial statements in the current uncertain environment. This is complemented by guidance from the PRA regarding the approach that should be taken by banks, building societies and PRA-designated investment firms in assessing expected loss provisions under IFRS9; and (c) guidance from the FRC for audit firms seeking to overcome challenges in obtaining audit evidence.
In Europe, the Committee of European Audit Oversight Bodies (CEAOB) issued a statement on 24 March 2020 on the impact of COVID-19 on audited financial statements, including the statement “auditors may need to postpone the issuance of their audit report, and where this is not possible or not likely to resolve the issue, auditors may need to modify their audit report to reflect that they have not been able to obtain the necessary audit evidence.” On 25 March 2020, ESMA issued guidance on accounting implications of COVID-19 and the EBA issued a related statement. And on 27 March 2020 ESMA released a statement notably as to its expectation that EU national regulators, during this COVID-19 period, not prioritise supervisory actions against issuers in respect of certain upcoming Transparency Directive deadlines regarding financial reports.
Audit firms have flagged the possibility that the COVID-19 pandemic may mean that companies will not prepare management accounts on a basis consistent with the accounting policies normally adopted in preparing their audited accounts. If that were to be the case, then the auditors would be unlikely to be able to carry out the typical procedures related to comparing amounts shown in management accounts in the manner they would have previously (as envisaged in the ICMA standard form of comfort letter set out at Appendix A2 of the ICMA Primary Market Handbook).

23 March 2020: Due Diligence and risk factors

Underwriters, issuers and guarantors of new bond issues will need to consider carefully the impact of the COVID-19 pandemic on the issuer and any guarantors’ ability to fulfil their obligations under the bonds. This is likely to impact underwriters’ due diligence; and issuers and guarantors will wish to ensure that, where the Prospectus Regulation applies, risk factor disclosure is specific to the issuer and/or guarantor(s) and not generic in nature.

23 March 2020: Transaction timetables

Underwriters and issuers will need to consider the impact of social distancing arrangements, including numerous transaction parties working from home, on transaction timetables. Not only is this relevant for the underwriters and issuers themselves, but other parties such as national competent authorities who may be involved in approving offering documentation, stock exchanges, agents, ICSDs, law firms, auditors and others. ICMA is not aware of any particular parties highlighting the possibility of delays to usual processes as a result of the COVID-19 pandemic, and some organisations are confirming that their timetables should not be affected by the crisis. Nevertheless, ICMA members have reported ad hoc delays to, for example, prospectus approvals.

23 March 2020: Signing arrangements
  • Syndicate / dealer panels signing: Under usual circumstances, documentation for a new bond issue or programme update would be signed on behalf of the syndicate or dealer panel by one bank pursuant to a signing authority provided to it by each other bank in the syndicate or dealer panel. Given current working from home and other social distancing arrangements, it seems likely that banks will start to sign documentation individually to avoid the logistical challenges associated with coordinating such signing authorities. Considerations associated with this include (a) communicating this to law firms drafting the relevant documentation and (b) communicating this to other relevant transaction parties providing documentation to the syndicate or dealer panel such as auditors.
  • Signing generally: Working from home and social distancing may also impact upon the ability of some transaction parties to sign and/or deliver documentation in “wet ink”. Market participants have been exploring with their legal advisors the validity and practicability of other methods of signing documentation, noting that various factors need to be considered including the governing law of the document, the jurisdiction of incorporation of the relevant parties and the type of document.

23 March 2020: Possible closures of financial centres

While it is not envisaged that any changes need to be made to standard provisions in bond terms and conditions relating to payments, market participants will wish to consider the practical implications of possible closures of financial centres and how relevant definitions in documentation relating to payments would work in that scenario, in particular where there are associated swap or other transactions.

17 March 2020: ICMA Podcast - Implications of COVID-19 for DCM transactions
The novel coronavirus (“COVID-19”) started to affect greater China in January and is now impacting the rest of the world. ICMA speaks to the Linklaters debt capital markets team in Asia, to discuss some of the legal issues and lessons learned for bond transactions, including due diligence, disclosure and risk factors, force majeure, other practical issues and their day-to-day work.