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Recommendation for the Treatment of Partial Redemptions

The ICMSA draws attention to certain anomalies and the lack of a standard process in relation to the treatment of partial redemptions of debt securities issued and held in Permanent Global Form within the ICSDs.

Practices that were developed for Bonds held in Definitive Form have been incorrectly defined and applied to terms and conditions for Global Bonds, and thus give rise to a number of practical as well as potential legal and documentary problems.

It is common place for “Drawings” to be maintained for partial redemptions on Global Bonds, which for practical purposes often had to be applied by the ICSDs by way of a pro rata reduction in the holding of each participant, and is then rounded to the nearest whole minimum denomination. This can lead to the minimum threshold for trading purposes being breached for certain holders preventing future trading of such holdings unless an amendment is made to the constituting documentation. In certain circumstances this could also lead to a potential breach of the minimum denomination requirements under the provision of the Wholesale Distribution provisions of the EU Prospectus Directive.

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