Calculation Agency & Calculation Advisory

• Convertible/exchangeable bonds and Capital Securities with an equity conversion feature typically include a broad range of events which can require a change to the conversion /rate (or exchange property), including
  • Dividends
  • Spin-offs, Demergers
  • M&A
  • Equity or Equity-linked Capital Raisings
  • Stock Splits / Consolidations

• Many convertibles, exchangeables and other equity-linked instruments include flexible settlement alternatives for the issuer upon conversion and/redemption of the instrument, by delivering either cash, shares or a combination thereof
• The determination of the relevant amount of shares and/or cash to be delivered to bondholders is based on complex price-setting processes and formulas
• ConvEx performs all relevant calculations if and when required, ensuring the issuer is able to manage its delivery obligations
• If needed ConvEx can also coordinate/interact with any hedge counterparty of the issuer
• In hiring ConvEx to perform settlement calculations, issuers:
  • minimise the risk of errors by obtaining external, expert assistance from an independent third party drastically cut the time and internal resources
  • outsource responsibility for the calculations to ConvEx
  • have the support of a name trusted by the market

• A make whole call (“MWC”) gives a bond issuer the ability to call a bond at any time, discounting future cash flows at the prevailing government bond yield plus a spread
• MWC has been a standard feature in the US and UK bond market for many years, and has fast become standard in the rest of Europe too over the last few years
• Significant variance in documentation between transactions, including a number of common problems – making the MWC often unnecessarily complex (and sometimes impossible) to operate

ConvEx as Calculation Agent (New Issues)

• ConvEx is named as Calculation Agent in the terms and conditions of the instrument at issue
• A Calculation Agent is the expert party responsible for performing calculations accurately and on a timely basis – an obligation that would otherwise lie with the issuer
• The Calculation Agent provides broad support to the issuer throughout the life of the instrument, including:
  • performing a detailed review of terms and conditions before issue with operability and clarity of calculations a key area of focus, feeding back comments to lawyers and bankers
  • monitoring events triggering calculations
  • drafting/dissemination of notices to investors
  • dealing with queries from investors and other related parties (trustee, other agents)
• By being named upfront and acting on a large number of issuers and instruments, the Calculation Agent can provide this service proactively and at a much lower cost than appointing an Independent Expert or other adviser on an ad hoc basis during the life of the instrument (especially if after problems have already arisen)

ConvEx as Calculation Advisor (Legacy instruments with no Calculation Agent)

• On instruments where no Calculation Agent was named in the terms and conditions of the instrument at issue, ConvEx can act as Calculation Advisor to the issuer, assisting the issuer with those calculations and other determinations that are required to be performed by it (and would otherwise be performed by the Calculation Agent, if one had been named in the terms and conditions)

ConvEx as Independent Expert

• When the transaction documentation lacks clarity or requires a discretionary determination to be made, ConvEx can provide an expert opinion for the issuer’s reliance – whether to satisfy the issuer’s obligations under the transaction documentation when these allow for the possibility of such an opinion (in which case such opinion is normally binding on investors), or in order to provide comfort to the issuer and its board