Dasha is an associate in the Firm's Capital Markets group in London. Her experience includes advising corporate trustees, collateral agents and other financial institutions in a broad range of capital market transactions, consent solicitations and debt restructurings.

Claudia is an associate in the Firm's Capital Markets group in London. Her experience includes representing investment banks and issuers on a range of capital markets transactions.

Prior to joining White & Case, Claudia interned at the U.S. Securities and Exchange Commission in the Division of Corporation Finance and at Petróleos Mexicanos (PEMEX) in the Legal Department of Project Structuring and International Support.

European Leveraged Finance Alert Series: Issue 3, 2018

While green bonds have been a high profile and popular instrument in the capital markets for the past few years, we expect 2018 to be a transformational year for the green loan market with the emergence of the first green CLOs and green residential mortgage-backed securities ("RMBS") which may ultimately become the primary source of financing for green loans (in particular longer dated green loans).

As discussed below, unlike the frameworks which have been developed and applied to green bond transactions there are currently no universally agreed principles that define what constitutes a green loan or a green securitisation, with both terms being used generically to describe loans or securitisations designed to have a positive environmental impact (for example, through providing financing for energy efficient housing). However, for the reasons described below, we expect 2018 to be the year that such standards begin to emerge, as both regulators and market participants turn their attention towards green investments.

At the forefront of these developments, White & Case is working with The Bank of England and The People's Bank of China, as co-chairs of the G20 Sustainable Finance Study Group, to help develop global standards for green CLOs, with recommendations expected at the G20 Leaders' Summit (30 November to 1 December 2018) later this year.

Favourable Regulatory Tailwinds

Global securitisation markets have been subject to considerable regulatory uncertainty since 2008, with the multi-year introduction and implementation of the Capital Requirements Regulation in the EU and Dodd-Frank in US.

In 2018, however, much of this uncertainty has finally passed, with the US risk retention rules now fully implemented and the EU Securitisation Regulation entering into force on 18 January 2018 (with effect from 1 January 2019). As a result, regulators have begun to turn their focus away from issues raised by the financial crisis towards considering how they can actively encourage the use of finance to support green initiatives.

While most of the MEPs’ proposed amendments to the Securitisation Regulation were not included (increasing the risk retention requirement and closing the EU securitisation market to all but EU-regulated sponsors and investors) in the final text, one proposal welcomed by the market was a requirement for sponsors or originators of securitisations to publish information on the energy efficiency of the underlying assets in RMBS and auto loan securitisations (securitisations of debt products financing car purchases) designed to receive beneficial regulatory capital treatment under the STS (simple, transparent and standardised) regime.

The Securitisation Regulation does not make energy efficiency a condition of STS; rather, the purpose of these disclosure requirements is to allow investors to "consciously decide to invest greener".¹ It seems likely, however, that regulators will soon take a more active role in promoting sustainable finance, both by developing common standards for green investments and making preferential regulatory capital treatment conditional on achieving certain environment outcomes (and penalising activities with a negative environmental impact).

The European Commission High-Level Expert Group on Sustainable Finance published its final report (the "Expert Group Report") in January 2018, which recommends that the European Commission investigate whether there is a risk-differential justifying the introduction of ‘green supportive' and ‘brown penalising’ factors.² In response, the European Commission’s Action Plan on Sustainable Finance, published on 8 March 2018, includes a commitment to "explore the feasibility of the inclusion of risks associated with climate and other environmental factors… in the calibration of capital requirements of banks".³

Untapped Investor Demand

Regulatory initiatives have the potential to supercharge demand for green loans and green mortgages at a time when investor demand for green investments already far outstrips supply, with investors representing US$24 trillion calling for the creation of more green investments⁴ (compared with a green loan market in 2014 of US$165 billion, representing only 15% of the value of all syndicated loans).⁵

From an investor perspective, green loans offer a number of advantages, in addition to the headline benefit of helping to combat climate change. Compared with a standard loan, green loans require more detailed analysis of the underlying assets, allowing banks to gain greater insight into the credit-worthiness of the borrower. Using proceeds to improve efficiency and reduce negative environmental effects also tends to increase the value of the underlying assets and reduce the risk of depreciation as markets become more sensitive towards concerns about energy efficiency and sustainability.

Compliance with use of proceeds restrictions requires companies to have systems in place to record the environmental impact of their activities. Many companies are already implementing these systems in response to pressure both from government policy (e.g. the recommendations made by the Task Force on Climate Related Financial Disclosures (TCFD)) and from investors and shareholders (see e.g. shareholder legal action against Commonwealth Bank for failing to make environmental impact disclosures in its annual report), reducing the additional burden of compliance for companies interested in green loans.

Green loans also have certain advantages over green bonds. Green loans are accessible to a much broader range of borrowers than green bonds, including SMEs and individuals, and can be made for lower amounts than are economically feasible for a bond offering. Because they are entered into directly with one or more lenders, green loans also offer greater scope for monitoring and enforcing the use of proceeds and other covenants than widely-held green bonds, with penalties for breach tailored to the specific circumstances (for example, if the quantitative sustainability targets set in a green loan facility agreement are not met, a higher interest rate can be charged).

Green Loan Principles

One of the barriers to achieving preferential regulatory capital treatment for green loans and green securitisations, which is highlighted in the Expert Group Report, has been the lack of universally agreed principles which can be used to define a class of 'sustainable assets'.⁶

While some green loans also include restrictions on the use of proceeds, in others the borrower is rewarded with a lower cost of funding the 'greener' their business as a whole is deemed to be by the lender(s) after a given time period. Similarly in the residential mortgage market homeowners are now able to obtain a 'green mortgage' over a property, under which the money saved through energy efficiency in the relevant property is added on to the mortgagor’s income for the purposes of calculating the level of funds that may be borrowed.

By contrast, growth of the green bond market has been facilitated by the development the Green Bond Principles⁷ (GBP), which allow for comparisons across green bond products and mutual recognition across markets and national authorities. The GBP include restrictions on the use of proceeds and reporting systems to monitor the use of funds and their environmental impact, and have been developed in parallel with the emergence of the first green bonds.

We expect to see a similar dynamic emerge in the green loan and green securitisations markets over the course of 2018, with a set of unifying principles emerging organically as loans are originated to comply with the eligibility criteria negotiated with investors in the first green CLOs and green RMBS, and those standards in turn being codified by industry associations and regulators as part of their initiatives to promote sustainable finance (the Loan Market Association, for example, published its set of Green Loan Principles on 21 March 2018). This process should set in motion a virtuous circle, with issuances of green securitisations providing funding to and increasing demand for green loans, while also helping to develop common market standards which can form the basis for future preferential regulatory capital treatment for green loans and green securitisations.

Strong investor demand for green investments allied with a desire by regulators to promote sustainable finance points towards 2018 being the year that green loans, funded by green CLOs and green RMBS, begin to transform finance into a tool for combating global climate change, one of our greatest challenges.

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¹ Paul Tang (who also acted as rapporteur for the Securitisation Regulation on behalf of MEPs), quoted in 'S&Ds back new rules for a stable securitisation market in Europe', 26 October 2017.
² Expert Group Report, p. 69. The European Commission has also proposed reforms which would require EU regulators to promote sustainable finance when exercising their regulatory discretion (European Commission, 'Reinforcing integrated supervision to strengthen Capital Markets Union and financial integration in a changing environment', 20 September 2018, p. 11).
³ Action Plan: Financing Sustainable Growth, p. 8.
⁴ Global Investor Statement on Climate Change.
⁵ IFC, 'Green Finance: a bottom-up approach to track existing flows', 2017.
⁶ Expert Group Report, p. 32.
⁷https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/GreenBondsBrochure-JUNE2017.pdf

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Callie Wallace is an associate in the Firm's Capital Markets Group in London. Her practice involves representing investment banks and companies on a range of cross-border capital markets transactions, including SEC registered public offerings, Rule 144A/Reg S offerings and other public and private financings.

On April 4, 2018, the Securities and Exchange Commission’s ("SEC") Division of Corporation Finance ("Corp Fin") posted two new compliance and disclosure interpretations ("CDIs")¹ regarding the use of non-GAAP financial measures in connection with business combinations:

Question 101.02

In Question 101.01, Corp Fin states that financial measures included in forecasts provided to a financial advisor and used in connection with a business combination transaction are not considered non-GAAP financial measures if certain conditions are met². New CDI 101.02³ provides that if the same forecasts provided to the company's financial advisor are also provided to its board of directors or a board committee, the financial measures will still be outside the definition of non-GAAP financial measures, so long as the specified conditions are satisfied.

Question 101.03

In this CDI, Corp Fin confirms that, if a registrant determines that forecasts exchanged between the parties in a business combination transaction are material and that disclosure of those forecasts is required to comply with the anti-fraud and other liability provisions of the federal securities laws, the financial measures included in those forecasts would be excluded from the definition of non-GAAP financial measures and, therefore, not subject to Item 10(e) of Regulation S-K and Regulation G.

¹ The CDIs are available here.
² This is because under Item 10(e)(5) of Regulation S-K and Rule 101(a)(3) of Regulation G, financial measures that are required to be disclosed by GAAP, SEC rules, or an applicable system of regulation of a government or governmental authority or self-regulatory organization are not considered non-GAAP measures. The specified conditions are: (i) the financial measures are included in forecasts provided to the financial advisor for the purpose of rendering an opinion that is materially related to the business combination transaction; and (ii) the forecasts are being disclosed in order to comply with Item 1015 of Regulation M-A or requirements under state or foreign law, including case law, regarding disclosure of the financial advisor’s analyses or substantive work.
³ Note that former Question 101.02 has been renumbered as 101.04.

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Global law firm White & Case LLP has advised the bank syndicate led by Crédit Agricole, Goldman Sachs and Morgan Stanley, as Global Coordinators and Joint Bookrunners, on Altran’s €750 million capital increase with preferential subscription rights, with which it will refinance the acquisition of Aricent.

The acquisition, which closed on March 20, 2018, enables Altran to become the undisputed global leader in the engineering and research & development services.

The net proceeds of the capital increase will be used to redeem the €250 million bridge facility in full, and also part of the €2.125 million Term Loan B, which were entered into in February 2018 in relation to the Aricent acquisition, and drawn in full. Altran shares are admitted to trading on the regulated market of Euronext Paris.

The White & Case team in Paris which advised on the transaction was led by partners Séverin Robillard and Thomas Le Vert and included partner Alexandre Ippolito, counsel Max Turner and associates Tatiana Uskova, Alice Chavaillard and Guillaume Keusch.

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Global law firm White & Case LLP has advised the bank syndicate led by BNP Paribas and Crédit Agricole CIB, as Global Coordinators and Joint Lead Managers, and ABN AMRO, ING, MUFG and Société Générale CIB, as Joint Lead Managers, on Euronext’s inaugural €500 million offering of 1% notes due 2025.

The bonds were admitted to trading on the regulated market of Euronext Dublin.

Euronext is the main stock exchange in Europe with more than 1,300 issuers. It will use the proceeds of the bonds issue to refinance its acquisition of the Irish Stock Exchange.

The White & Case team in Paris which advised on the transaction was led by partner Cenzi Gargaro with support from associate Charles Linel.

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News and analysis service Latin Lawyer has named a transaction on which White & Case advised among its "Deals of the Year" for 2017 at its 12th annual Deal of the Year Awards in São Paulo. The winning deal, cement manufacturer Loma Negra's US$1.1 billion initial public offering (IPO), was named Deal of the Year in the Corporate Finance category.

"Each year, Latin Lawyer offers awards to general counsel and law firms advising on the most significant deals of the year across Latin America," according to Latin Lawyer. "Considerations when deciding the winner will include value, timeframe, complexity, legal creativity shown, political and regulatory sensitivity, number of jurisdictions to which the deal relates," and other criteria.

In the winning transaction, the White & Case Latin America Capital Markets team acted for Loma Negra in its IPO of American Depositary Shares (ADSs). The ADSs are listed on the New York Stock Exchange, and the ordinary Loma Negra shares are listed on the Bolsa y Mercados Argentinos. The transaction was the largest US IPO of a Latin American issuer in 2017, and the third-largest ever by an Argentine issuer.

International Financial Law Review (IFLR) bestowed multiple honors on global law firm White & Case at its 19th annual IFLR European Awards for 2018: The Firm was named Most Innovative US Law Firm in Europe, and also Law Firm of the Year in the Czech Republic (an honor the Prague office previously won for 2014, 2015 and 2016).

In addition, two transactions on which White & Case advised were named "Deals of the Year" at the awards ceremony on April 19 in London: "Nordea Bank consent solicitations" was named Debt and Equity-Linked Deal of the Year, and "AnaCap Financial Europe" was named High Yield Deal of the Year.

IFLR is a prestigious international ratings guide that performs independent reviews in selected countries to rank the top firms in financial and corporate law.

"On behalf of all of the partners of the Prague office, I would like to thank our clients, for they made it possible for us to work on the biggest transactions on the Czech and global market, many of which have broken new ground," said Plch, White & Case executive partner for Prague. "I should mention our representation of PPF Group in launching their own bank in Great Britain; ClearBank, which is the first newly-established clearing bank in more than 250 years; the unique pre-packaged reorganization plan that was approved to put Motorpal back on its feet; the financial restructuring of Agrokor Group, in which we represent a creditor in connection with the insolvency of this, the largest Croatian company; the sale of the Olympia shopping mall in Brno, which marks the biggest real estate deal in the Czech Republic in 2017; and last, but not least, the representation of Waberer's International in connection with their IPO and the listing of their shares on the Budapest Stock Exchange."

The unique position of White & Case's Prague office has also been confirmed by the recently published rankings of the prestigious international rating guides Chambers Global, Chambers Europe and The Legal 500. All of them have consistently continued to rank White & Case at or near the very top across all categories that they review. 

Global law firm White & Case LLP has advised the bank syndicate led by Barclays, BNP Paribas, Citigroup, Crédit Agricole CIB, HSBC, Morgan Stanley, Natixis and Société Générale as joint lead managers on Capgemini's €1.1 billion notes offering. This offering is composed of a €600 million 1% notes due 2024 and a €500 million 1.75% notes due 2028.

The net proceeds of the €600 million offering have been used to refinance the existing notes due 2020, issued in 2015, by way of an intermediated tender offer.

The net proceeds of the €500 million offering will be used by Capgemini for general corporate purposes, including the redemption of the existing €500 million floating rate notes due 2018, issued in 2015.

The White & Case team in Paris which advised on the transaction was led by partners Séverin Robillard and Grégoire Karila and included partner Alexandre Ippolito and associates Charles Linel and Guillaume Keusch.

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Global law firm White & Case LLP has advised J.P. Morgan, Deutsche Bank, Goldman Sachs and Morgan Stanley, as joint bookrunners, on a €800 million dual tranche bond issue and an up to €200 million tender offer by ADLER Real Estate Aktiengesellschaft.

The first tranche of the notes with an aggregate principal amount of €500 million has a term of five years and a fixed coupon of 1.875%, the second tranche of the notes with an aggregate principal amount of €300 million has a term of 8 years and a fixed coupon of 3.00%. The notes will be admitted to trading on the Main Securities Market of the Irish Stock Exchange.

The proceeds from the issue of the notes are inter alia used to repurchase for cash up to €200 million of ADLER Real Estate Aktiengesellschaft's outstanding €500 million 4.75% bonds due 2020. The terms of the tender offer were announced on April 19, 2018 and the offer ended on April 27, 2018.

The White & Case team in Frankfurt which advised on the transactions was led by partner Karsten Wöckener (Frankfurt) and included local partner Dr. Cristina Freudenberger, partners Rebecca Emory, Gernot Wagner, Dr. Bodo Bender (all Frankfurt) and Ray Simon (New York) as well as associates Florian Fraunhofer, Dr. Peter Becker and Philipp Kronenbitter (all Frankfurt).

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European Leveraged Finance Alert Series: Issue 4, 2018

Immediately in the aftermath of the 2008/2009 financial crisis, the provisions governing transfers of interests in loans were more or less settled, with an established standard that a lender did not need the consent of a borrower to transfer its interest in a loan if that transfer was:

• to a lender or to an affiliate or related fund of a lender;
• to an entity set out on an agreed list; or
• made while an event of default was continuing.

Consent to a transfer could also not be unreasonably withheld and was deemed to be given within a short period of time (usually five business days).

However, more recently, market conditions have meant that demand has consistently outstripped supply; and the transferability of loans is firmly back on the agenda. With the ever-increasing liquidity in the TLB market, and an ever-growing universe of types of entities (beyond CLOs and encompassing other non-bank entities) involved in purchasing leveraged debt, sponsors and borrowers are seeking to take and retain greater control over the composition of the lender group.

This article takes a look at the current trends that we are seeing in the European leveraged market.

Approved lenders

It is commonplace to have an agreed list of entities to which a lender can transfer its interests without the borrower's consent (commonly referred to as an approved list or white list), and which the borrower may update throughout the life of the loan, for example, by removing up to five names a year. Additional restrictions are beginning to be placed on the approved list concept and loan documents increasingly include:

• restrictions, whether or not there is an event of default continuing, on a new lender (together with its affiliates) becoming a lender or sub-participant in respect of more than a certain amount (commonly 10%) of the total commitments, in order to prevent a single entity from acquiring a blocking stake;
• no overall cap on the number of names that may be removed from the approved list over the life of the loan by the borrower, and no requirement to agree or attempt to agree replacement names;
• blanket carve-outs to any entity on the approved list that is a distressed debt fund, loan to own investor or industry competitor (see further below); and
• requirements for transferring lenders to notify a borrower prior to any transfer being effective, even if the transferee is on an approved list.

In each case, a breach of the relevant transfer requirement disenfranchises the applicable commitment from voting and/or the transfer is deemed to be void.

Disqualified lenders

In contrast to the approved list concept, there has also been an attempt to introduce a disqualified lender concept (commonly referred to as a blacklist) which operates in the opposite manner to the approved list, i.e., by naming select institutions to which the loan may not be transferred. Although at face value this may seem to be an improved position for a lender, the removal of the approved list concept means transferability under a loan document is limited to transfers to an affiliate or related fund of a lender, transfers when a specified event of default is occurring (and the blacklist then further carves back these positions) or transfers following borrower consent.

This is an agreed standard in the US, where there is usually no approved list. On certain transactions in Europe now, with primarily US borrowers/sponsors borrowing in the European market, borrowers have sought to remove the approved list and instead include a disqualified lender list that applies notwithstanding whether or not an event of default is continuing. While this standard may be more palatable for lenders in the context of a super-senior RCF, which is generally less liquid, it may be less desirable to TLB investors.

Industry competitors

Lenders generally cannot transfer their interest in a loan to an industry competitor of the borrower without the borrower’s consent. There is not yet a standardised definition of "industry competitor", meaning that in some loan agreements (and this is becoming more commonplace), it can be drafted very expansively to include affiliates of industry competitors, including controlling shareholders, and any private equity sponsor. From a lender’s perspective, similar exceptions to those granted under distressed debt fund definitions should be considered (e.g., any bank or financial institution whose principal business or a material activity is investing in debt). Most prohibitions will continue whilst any event of default is continuing.

Events of Default

The borrower's risk of debt being sold to distressed debt funds or competitors must also be weighed sensibly against the fact that those entities are perhaps being the only interested parties while the borrower is in default. Historically, transfer restrictions have fallen away upon an event of default. However, it is becoming increasingly common for limitations on transfers to:

• stay in place, in the case of transfers to distressed debt funds and/or competitors; or
• only fall away upon specified material events of default, usually limited to a payment event of default in respect of principal or interest, a financial covenant event of default (if any financial covenant is applicable to the term debt) or an insolvency event of default.

Acting reasonably and deemed consent

The requirement that a borrower must act reasonably on any consent request for a transfer, and that the borrower's consent be deemed given after the expiry of a specified period of time, has been eroded. Often, on top-tier sponsor transactions, neither requirement is included, or deemed consent will be after a longer period of time (e.g. ten business days).

Sub-participation

Sub-participations have long been a method favoured by lenders under which they could (to a degree) avoid the transfer restrictions imposed on them by a borrower. The position has begun to change more recently as borrowers become increasingly sensitive to this circumvention, as it became clear that sub-participants could use their position to influence how a lender of record would use its voting rights or at a minimum hold some sway over its actions or involve some form of consultation right in decision making. Borrowers are now regularly requiring any sub-participation that transfers a lender of record's voting rights to be only at the consent of the borrower, while certain borrowers are now even requiring transfers of non-voting sub-participations to be subject to the same consent requirements as an outright transfer. In addition, there is an influx of requirements being imposed on sub-participations, such as:

• prior to entering into any sub-participation, full details of the agreement, including all rights to be granted to the sub-participant, are to be provided to the borrower;
• the relationship between the lender and proposed sub-participant must be one of contractual debtor and creditor; and
• the lender of record must maintain a register of each sub-participant’s name, address and principal interest in the loan or other obligations under the loan, which it will share with the borrower upon reasonable request.

Conclusion

While the market conditions support sponsor and borrower friendly terms, it is understandable that one aspect of a transaction a borrower will want to control is over the composition of its syndicate. From a lender’s perspective, the tighter control over transfers needs to be considered in conjunction with the general dilution of lender rights. Over the lives of cov-lite TLB loans, although early warning signs that a business is in financial difficulty will be evident in the financials that are delivered under the terms of the loan, there are unlikely to be any trigger events that would oblige a company to return to the negotiating table. Instead, a payment default is the most likely event that will trigger an acceleration right for the lenders. Lenders should, therefore, be mindful of the inability to transfer at this stage to precisely those institutions that would purchase such loans.

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The Italian legislators enacted new measures that require prompt and detailed disclosure of the objectives of investors who acquire interests exceeding 10%, 20% or 25% in companies listed on the Milan Stock Exchange.

Any acquisition in a company listed on a regulated market of the Milan Stock Exchange (the "Company") that results in the purchaser holding a stake exceeding 10%, 20% or 25%, requires the purchaser to publicly announce its objectives for the subsequent six months with respect to the Company. The law decree of October was converted into law at the beginning of December.¹

The new rules are particularly designed to provide guidance to the market where a company’s share capital is fragmented and in cases where such acquisition does not require the purchaser to launch a mandatory takeover². The new rules were also prompted in response to recent cases where a purchaser bought stakes below the 25% threshold (which, in some scenarios, allows the exercise of de facto control) without disclosing their long term objectives with respect to the target group (e.g. Vivendi’s investment in Telecom Italia).

Disclosure Requirement. The purchaser will have to notify the Italian securities commission (Consob) and the issuer the following information:

• how the acquisition of the new interest was financed;
• whether the purchaser acted alone or in concert with other persons;
• whether the purchaser intends to further increase its interest in the Company;
• whether the purchaser intends to acquire control over the Company or exercise influence over its management, and if so, its strategies;
• the purchaser’s intentions with regard to any shareholders' agreements into which they have entered; and
• whether the purchaser intends to propose any changes to management or any corporate body of the Company.

Timing of disclosure. The purchaser has to notify the Company and Consob within 4 business days of the date when the obligation to buy is binding and Consob notifies the market within the three following business days. Consob may identify, with ad hoc regulations, exemptions to the new disclosure obligations, based on the characteristics of the purchaser or of the target company.

Duty to Update for Six Months. If the purchaser’s objectives change within six months of the date of the filing, as a consequence of supervening objective circumstances, the purchaser must notify Consob, the Company and the market in a new filing of the revised objectives, detailing the reason for the change. The purchaser’s duty to update extends for a further six-month term following the publication of the updated disclosure. The new rules do not clarify if this obligation extends further³.

Non-Compliance Penalties. Failure to comply with the new disclosure requirements is punishable by administrative sanctions and a monetary fine. The fine may be material and can be calculated at the higher of (i) a range between Euro 10 thousand and Euro 10 million or (ii) up to 5% of the annual turnover of the purchaser. Criminal sanctions applicable to market manipulation could eventually apply in case the information disclosed to the public is held misleading.

A clarification by Consob on several aspects of the new rules is expected, including the level of detail of the disclosure and whether disclosure is required when a purchaser is also required to launch a mandatory takeover bid by exceeding the 25% threshold.

* * *

Effect on Purchasers. Purchasers of stakes should be careful in planning acquisitions and be clear in defining the strategy (including what statements they need to make and the consequences of such statements). This may affect how a takeover is planned since in some cases earlier disclosure will need to be made of intentions.

Effect on Targets. On the other hand, the new rules aim to protect Companies that are the target of purchasers slowly building a stake. We expect that targets will carefully monitor compliance with the provisions in order to use them as a defensive mechanism to help protect their independence.

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¹ Law Decree No. 148 of October 16, 2017, converted into law No. 172 of December 4, 2017.
² Under Italian law, a shareholder is required to launch a takeover bid when it exceeds the threshold of 30% of the target’s voting rights, or 25% if the target is not a SME and there is no other shareholder holding a higher percentage.
³ There is a discrepancy, however, in the two different versions of the conversion law published simultaneously in the Italian Official Gazette: according to the consolidated version of the law converting the law decree, the six-month period obligation to update the disclosure is still in force, whereas, according to the other version of the conversion law published simultaneously on the Official Gazette, the obligation to update the disclosure is repealed. We expect that a clarification on the matter will come from the legislators.

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Global law firm White & Case LLP has advised Gamenet Group S.p.A. on the issuance of its €225 million high yield Senior Secured Guaranteed Floating Rate Notes due 2023.

The notes have been listed on the Luxembourg Stock Exchange and offered and sold pursuant to Rule 144A and Regulation S under the Securities Act. A portion of the proceeds has been used to redeem Gamenet's existing €200 million Senior Secured Guaranteed 6% Notes due 2021.

White & Case also advised Gamenet on a new €30 million super senior revolving credit facility to support the group's working capital needs.

The White & Case team advised on US, English and Italian law aspects of the transaction and comprised partners Michael Immordino (London & Milan), Ferigo Foscari, Iacopo Canino (both Milan) and James Greene (London), associates Robert Becker and Lorenzo Colombi Manzi and lawyer Alessandro Piga (all Milan).

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Global law firm White & Case LLP has advised Piaggio & C. S.p.A. on the issuance of a new €250 million high yield bond, 3.625% percent Senior Notes due 2025 and the related exchange offer to refinance its outstanding 4.625% Senior Notes due 2021.

The new Notes have been listed on the Luxembourg Stock Exchange and offered and sold pursuant to Rule 144A and Regulation S under the Securities Act.

The White & Case team which advised on the transaction comprised partners Michael Immordino (London & Milan), Ferigo Foscari (Milan) and James Greene (London), local partner Paul Alexander (Milan) and associates Robert Becker, Louise Ruggiero and Bart Galvin (all Milan) and lawyer Charles English (Milan).

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The Hong Kong Stock Exchange has amended its Listing Rules to allow listings of biotech companies that do not meet financial eligibility tests, high growth and innovative companies with weighted voting rights structures, and innovative companies listed elsewhere seeking a secondary listing through a concessionary route.

On 24 April 2018, The Stock Exchange of Hong Kong Limited (the "Stock Exchange") published its Consultation Conclusions on a Listing Regime for Companies from Emerging and Innovative Sectors, introducing three new chapters in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") with the aim of attracting high growth companies from emerging and innovative sectors to list in Hong Kong, subject to appropriate safeguards. The Listing Rules amendments are supplemented with guidance letters on the suitability for listing of companies applying to be listed under each of these chapters.

Biotech Companies

The Stock Exchange has introduced a new Chapter 18A of the Listing Rules to allow the listing of biotech companies that do not meet the financial eligibility tests (including companies with no revenue or profit). "Biotech" is defined as the application of science and technology to produce commercial products with a medical or other biological application, and "biotech company" is defined as a company primarily engaged in the research and development ("R&D"), application and commercialisation of biotech products. Applicants are required to satisfy the requirements of Chapter 18A in addition to the listing requirements under Chapter 8 of the Listing Rules. They must also demonstrate that they are both eligible and suitable for listing.

Listing Requirements

Suitability for Listing

A biotech company applicant is required to demonstrate the following features:

• having developed at least one core product beyond the concept stage (having met developmental milestones specified for the relevant type of product including pharmaceutical (small molecule drugs), biologics, medical devices and other biotech products. For pharmaceutical and biologics, this would generally mean completing Phase I clinical trials and the competent authority (including US Food and Drug Administration, the China Food and Drug Administration, the European Medicines Agency and other authorities recognised by the Stock Exchange) has no objection for the applicant to commence Phase II (or later) clinical trials;
• having been primarily engaged in R&D for the purposes of developing its core product(s), and having been engaged with the R&D of its core product(s) for a minimum of 12 months prior to listing;
• having as its primary reason for listing the raising of finance for R&D to bring its core product(s) to commercialisation;
• having registered patents, patent applications and/or intellectual property in relation to its core product(s);
• if the applicant is engaged in the R&D of pharmaceutical (small molecule drugs) products or biologic products, demonstrating that it has a pipeline of those potential products; and
• having previously received meaningful third party investment from at least one sophisticated investor at least six months before the date of the proposed listing (which must remain at IPO). The Stock Exchange would assess on a case-by-case basis: (a) whether the investor is a sophisticated investor, considering factors such as net assets, assets under management, investment experience, and relevant knowledge and expertise; and (b) what would be considered meaningful investment, with the following being indicative benchmarks: not less than 5% of share capital for a market capitalisation of HK$1.5 billion to HK$3 billion, not less than 3% of share capital for a market capitalisation of between HK$3 billion and HK$8 billion, and not less than 1% of share capital for a market capitalisation of more than HK$8 billion.

The above factors are not exhaustive or binding and the Stock Exchange retains the discretion to find the applicant is not suitable for listing even if the above features are satisfied.

Other Listing Requirements

A biotech applicant is also required to satisfy the following listing requirements:

• having been in operation in its current line of business for at least two financial years prior to listing under substantially the same management;
• having a minimum expected market capitalisation at the time of listing of HK$1.5 billion; and
• having available working capital to cover at least 125% of the group's costs for at least the next 12 months (after taking into account the proceeds of the listing), which must substantially consist of general, administrative and operating costs, and R&D costs.

Subscription by Cornerstone Investors and Shareholders

In addition to the usual public float requirements – in general, at least 25% of the total number of issued shares must be held by the public – biotech applicants are subject to an additional requirement to have at least HK$375 million of its market capitalisation to be held by the public at the time of listing. Shares subscribed by cornerstone investors and shares subscribed by existing shareholders in the IPO will not be considered to be held by the public for the purpose of calculating the HK$375 million.

Enhanced Disclosure

Biotech applicants must include prominent warning statements and enhanced risk disclosures in their listing documents, including disclosures on:

• the phases of development for its core product(s);
• material communications with all relevant competent authorities in individual cases) in relation to its core product(s) (unless restricted under applicable requirements);
• all material safety data relating to its core product(s);
• the immediate market opportunity and any potential increased market opportunity of its core product(s);
• its rights and obligations in respect of any in-licensed core products;
• disclosure of operating costs, including details of R&D spending;
• patents granted and applied for in relation to its core product(s) (unless the applicant is able to demonstrate that this would require the applicant to disclose highly sensitive commercial information); and
• the R&D experience of management and measures to retain key management or technical staff.

In addition, they will be required to provide ongoing disclosures regarding their R&D activities in their interim and annual reports.

Risk Management Measures

A biotech applicant will be subject to the following restrictions and measures after listing until it could demonstrate that it is able to satisfy one of the financial eligibility tests:

• it will be restricted from effecting any transaction that will result in a fundamental change to its principal business without the prior consent of the Stock Exchange;
• where it fails to meet its continuing obligation to maintain sufficient operations or assets, it will be required to re-comply with the requirement within 12 months, failing which the Stock Exchange will cancel its listing; and
• it must be prominently identified through a unique stock marker "B" at the end of their stock name.

WVR Structures

The Stock Exchange has introduced a new Chapter 8A of the Listing Rules setting out the qualifications for listing of companies with a weighted voting rights ("WVR") structure and the ongoing safeguards that they must put in place. These requirements apply in addition to the usual listing requirements (including the financial tests). Applicants are required to demonstrate that they are both eligible and suitable for listing with a WVR structure.

Listing Requirements

Suitability for Listing

An applicant with a WVR structure would normally be considered suitable for listing in Hong Kong if it is able to demonstrate the following characteristics:

• the applicant must be an innovative company. The Stock Exchange expects the applicant to possess more than one of the following characteristics:
  • its success is demonstrated to be attributable to the application, to the applicant's core business, of new technologies, innovations and/or a new business model;
  • R&D is a significant contributor of its expected value and constitutes a major activity and expense;
  • its success is demonstrated to be attributable to its unique features or intellectual property; and/or
  • it has an outsized market capitalisation / intangible asset value relative to its tangible asset value.

The Stock Exchange recognises that what is considered "innovative" depends on the state of the industries and markets in which an applicant operates, and will change over time. It will therefore review the facts and circumstances of each case to determine if an applicant has demonstrated that it is an innovative company;

• the applicant must demonstrate a track record of high business growth, as can be objectively measured by operational metrics such as business operations, users, customers, unit sales, revenue, profits and/or market value (as appropriate) and its high growth trajectory is expected to continue;
• each WVR beneficiary must have been materially responsible for the growth of the business, by way of his skills, knowledge and/or strategic direction in circumstances where the value of the company is largely attributable or attached to intangible human capital;
• each WVR beneficiary must be a director of the issuer at the time of listing. The WVR beneficiary must also have an active executive role within the business, and has contributed to a material extent to the ongoing growth of the business; and
• the applicant must have previously received meaningful third party investment from at least one sophisticated investor (which must remain at IPO). Such investors will be required to retain an aggregate 50% of their investment at the time of listing for a period of at least six months post-IPO (subject to exceptions for de minimis investments by specific investors provided that the main investors are in compliance). The Stock Exchange would not normally require an applicant to demonstrate that it has received meaningful third party investment if the applicant is a spin-off from a parent company.

The above factors are not exhaustive or binding, and the Stock Exchange retains absolute discretion to reject an application even if these requirements are met or on suitability grounds if the WVR structure is an extreme case of non-conformance with governance norms.

Expected Market Capitalisation

The applicant must satisfy either of the following: (a) have a market capitalisation of at least HK$40 billion at listing; or (b) have a market capitalisation of at least HK$10 billion at listing and revenue of at least HK$1 billion in its most recent audited financial year.

Minimum Economic Interest

All WVR beneficiaries must collectively beneficially own at least 10% of the underlying economic interest in the applicant's total issued share capital at listing. The Stock Exchange may accept a lower minimum shareholding percentage on a case-by-case basis if the lower percentage shareholding still represents a very large amount in absolute dollar terms (for example, if the applicant has a market capitalisation of over HK$80 billion at listing) taking into account other factors as appropriate.

WVR Safeguards

The new rules contain WVR safeguards including those set out below. Some of these safeguards must be incorporated in the issuer's constitutional documents.

Ring-Fencing

Companies with WVR rights will be subject to the following restrictions:

• only new applicants will be able to list with a WVR structure and the Stock Exchange will seek to ensure that companies do not use artificial means to circumvent this and other restrictions;
• they are prohibited from increasing the proportion of WVR in issue or issuing any further WVR shares;
• WVR beneficiaries have a limited right of pre-emption for pro rata offerings to all shareholders or pro rata issues of securities to all shareholders by way of scrip dividends, or stock splits (or similar transactions), provided that the proportion of WVRs in issue is not higher after the corporate action; and
• issuers will be prohibited from changing rights attached to WVR shares to increase the WVRs attached to those shares. Issuers may change terms to reduce the WVRs attached to its shares with prior approval from the Stock Exchange and an announcement.

Lapse of WVRs

The WVRs will lapse permanently if a WVR beneficiary:

• dies, ceases to be a director, or is deemed by the Stock Exchange to be incapacitated or to no longer meet the requirements of a director set out in the Listing Rules (for example, if the director failed to comply with the requirement for corporate actions to be conducted on a one vote per share basis); or
• transfers his beneficial interest or economic interest in those shares, or the voting rights attached to them, to another person (subject to limited exceptions in the case of trust and other structures for estate and/or tax planning purposes).

Conversion Ratio

The WVR shares must be converted into ordinary shares (whether on a voluntary basis or mandated by the Listing Rules) on a one-to-one ratio. Applicants must seek from the Stock Exchange as part of the initial listing application approval of the issue of WVR shares and listing of shares upon conversion.

Voting Rights

WVR structures must be subject to the following restrictions:

• a WVR structure must be attached to a specific class of unlisted shares. The WVRs attached to them must confer to a beneficiary only enhanced voting power on resolutions tabled at general meetings;
• voting power attached to WVR shares must be capped at not more than ten times the voting power of ordinary shares;
• the WVR structure must enable non-WVR shareholders to cast at least 10% of the votes eligible to be cast on resolutions at general meetings. Non-WVR shareholders holding at least 10% of the voting rights on a one vote per share basis must be able to convene a general meeting and add resolutions to the meeting agenda; and
• the following matters must be decided on a one vote per share basis: changes to the issuer's constitutional documents; variation of class rights; appointment or removal of an independent non-executive director or auditors; and voluntary winding-up of the issuer.

Deemed Connected Person and Core Connected Person

A WVR beneficiary and any vehicle through which the WVR beneficiary holds the WVR shares are deemed to be connected persons and core connected persons of the issuer, and are subject to the connected transaction requirements under the Listing Rules.

Corporate Governance

Issuers with WVR structures are required to implement the following enhanced corporate governance measures:

• establish a Corporate Governance Committee comprised entirely of independent non-executive directors ("INEDs"), and include a summary of the work of the committee in the Corporate Governance Report that it discloses in its half-yearly and annual report;
• mandate certain provisions of the Corporate Governance Code regarding the role of an INED, establishment of a nomination committee (comprised of a majority of INEDs and chaired by an INED) and retirement of INEDs by rotation at least once every three years. The nomination committee will be solely responsible for making recommendations to the board of directors regarding the nomination of INEDs;
• require that the issuer engage a compliance adviser on a permanent basis and consult with the adviser on matters related to its WVR structure, transactions in which the WVR beneficiaries have an interest and where there is a potential conflict of interest between non-WVR shareholders and WVR beneficiaries; and
• require directors, senior management and the company secretary to undergo appropriate training on WVR and its associated risks.

Enhanced Disclosure

Issuer with WVR structures must make the following enhanced disclosures:

• prominently identify through a unique stock marker "W" at the end of their stock name;
• include the warning "a company controlled through weighted voting rights" and describe the WVR structure, the issuer's rationale for having it and the associated risks for shareholders prominently on the front page of all its listing documents, periodic financial reports, circulars, notifications and announcements required by the Listing Rules; and
• identify the WVR beneficiaries, impact of potential conversion into ordinary shares on share capital, and circumstances under which the WVRs will cease in its listing documents, annual reports and interim reports.

Secondary Listings of Qualifying Issuers

To attract large emerging and innovative companies with primary listings in the US and on other major international exchanges to list in Hong Kong, the Stock Exchange has added a new Chapter 19C of the Listing Rules to create a new concessionary route to secondary listing for "qualifying issuers", while preserving important protections for Hong Kong investors.

Listing Requirements

A qualifying issuer must demonstrate that it is both eligible and suitable for listing and must:

• be an innovative company, by reference to the characteristics set out above. The Stock Exchange retains a discretion to find a qualifying issuer not suitable for listing even if it satisfied these characteristics;
• have a good record of compliance for at least two full financial years on a qualifying exchange (namely, the New York Stock Exchange, Nasdaq or the "Premium Listing" segment of the London Stock Exchange's Main Market); and
• have an expected market capitalisation at the time of secondary listing of at least HK$10 billion. A secondary listing applicant (a) with a WVR structure; and/or (b) which has a "centre of gravity" in Greater China (a "Greater China Issuer") is also required to have at least HK$1 billion of revenue in its most recent audited financial year if it has an expected market capitalisation at the time of secondary listing in Hong Kong of less than HK$40 billion.

An applicant applying for secondary listing under this route is entitled to make a confidential filing of its Application Proof.

Automatic Waivers

The Stock Exchange has codified and applied to qualifying issuers the waivers in the Listing Rules that it currently automatically grants to eligible secondary listed companies, for example, with respect to notifiable and connected transactions and the Corporate Governance Code.

Corporate Governance

A qualifying issuer must also prominently disclose in its listing documents provisions in its constitutional documents concerning governance that are unusual compared with normal practices in Hong Kong.

Concessions for Grandfathered Greater China Issuers and Non-Greater China Issuers

The new rules apply different requirements depending on the type of issuer and are set out in the table below:

Next Steps

The Stock Exchange currently accepts formal pre-IPO enquiries and listing applications under the new rules. It expects the first listings under the new regime to take place in June or July 2018. The Stock Exchange plans to launch a separate consultation by 31 July 2018 to explore the option of allowing corporate entities to benefit from WVRs.

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© 2018 White & Case LLP

Global law firm White & Case LLP has advised J.P. Morgan, HSBC and Barclays, as global coordinators, and Merrill Lynch International, BNP Paribas, Citigroup, Crédit Agricole, Goldman Sachs, Rabobank and Société Générale, as joint bookrunners, on the Rule 144A/Regulation S debut offering of $1.15 billion (equivalent) senior secured notes due 2023 by OCI N.V.

OCI N.V. is a Netherlands-based global producer and distributor of natural gas-based fertilizers and industrial chemicals, listed on the Euronext Amsterdam stock exchange with a market capitalization of €4.2 billion. The notes, which were issued on April 26, 2018, comprise US$650 million 6.625% senior secured notes due 2023, and €400 million 5.000% senior secured notes due 2023.

Concurrently with the notes offering, White & Case advised the mandated lead arrangers on the establishment of US$1.1 billion (equivalent) senior credit facilities for OCI N.V., comprised of a term loan facility in an amount of up to US$400 million (denominated in euros), and a multicurrency revolving credit facility of up to US$700 million.

"We have advised on a high profile transaction for OCI N.V., which represents a great example of an integrated bank/bond solution for a sophisticated multinational corporate issuer," said London-based White & Case partner Rob Mathews, who together with London partners Martin Forbes and Jill Concannon, and Cairo-based association partner Tarek Mohanna, led the Firm's deal team.

The proceeds from the sale of the notes, together with borrowings under the senior credit facilities, were used by OCI N.V. to refinance certain existing facilities and to repay certain outstanding shareholder debt.

The White & Case team which advised on the transaction included partners Rob Mathews, Jill Concannon, Martin Forbes, James Greene, Richard Pogrel (all London) and Ray Simon (New York), association partner Tarek Mohanna (Cairo) and associates Shameer Shah, Julian Brun, Anna Soroka, Neha Saran, Nigela Houghton, Marissa Florio and Michael Byrd (all London).

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Global law firm White & Case LLP has advised the bank syndicate including the European Investment Bank (EIB), AUXIFIP, Banca IMI (Intesa Sanpaolo Group), Caisse Régionale de Crédit Agricole Alsace Vosges, CaixaBank, Československá obchodni banka and KBC Bank, as well as CA-CIB as agent, on the €186 million financing for the Strasbourg western bypass motorway (A355) concession to be built and operated by ARCOS (Vinci Group).

The project costs are in excess of €700 million, and the total debt financing amounts to €359 million, with the EIB providing 50 percent of the debt, including a €56 million mezzanine debt to support the financing of the concession. The mezzanine debt is a new EIB product - the Senior Debt Credit Enhancement (SDCE) loan, which aims to enhance senior loans via a junior loan drawn during the operation phase. The A355 project not only helped develop this new instrument, but also allowed its implementation in France for the first time.

Early in 2016, ARCOS (Vinci Group) signed an agreement with the French ministry responsible for transport to build and operate the highway concession for a period of 54 years. The A355 is a 24 kilometer, two-lane motorway, which will facilitate long distance transit by avoiding the city of Strasbourg. The new road will supplement the existing network, improve road safety and reduce traffic congestion on the existing A35.

The White & Case team in Paris which advised on the transaction was led by partners Paule Biensan, Jacques Bouillon, François-Guilhem Vaissier and Grégoire Karila, with support from counsel Marianna Sédéfian and associates Olivier Le Bars, Charlène Ntsiba, Renaud Nething, Jean-François Le Corre, Boris Kreiss and Diane Houriez.

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Dominic is well known for his corporate finance and mergers and acquisitions (public and private) work. He regularly advises both corporate clients and investment banks on a wide variety of equity capital markets, Listing Rule and Takeover Code transactions, as well as corporate governance matters. Dominic has spent time on secondment with Citi's ECM legal team.

Dominic has a particular focus on large, complex, cross border M&A transactions involving UK public companies, and has been recommended by the Legal500 for M&A – upper mid-market and premium deals.

Dominic also has sector expertise in the healthcare, gaming and consumer and retail industries.

Global law firm White & Case LLP has advised Goldman Sachs & Co. LLC, Inter-American Investment Corporation (IDB Invest), International Finance Corporation (IFC) and Swiss Export Risk Insurance (SERV) in structuring approximately R$5.0 billion (US$1.8 billion) in financing for the design, construction and operation of a 1,516 MW thermoelectric power plant in Brazil.

According to Business News Americas, the power plant will be Latin America's largest gas-fired power generation project. It will be located in the municipality of Barra dos Coqueiros, in the State of Sergipe, Brazil.

Goldman served as global coordinator, sole book-running manager and sole initial purchaser in connection with a R$3.2 billion investment-grade senior secured notes offering by a Luxembourg special-purpose vehicle (Lux SPV) and as sole syndication agent, sole lead arranger, sole lead bookrunner and lender of a R$168.5 million loan to the Lux SPV.

The Lux SPV used the proceeds from the notes and the loan to purchase R$3.37 billion worth of Brazilian debentures, issued by CELSE - Centrais Elétricas de Sergipe S.A., the project company. CELSE also received committed loans from IDB Invest and IFC. SERV will insure up to 95% of CELSE's payment obligations under the Brazilian debentures, resulting in what is believed to be the first time they have insured an issuance of a capital markets instrument.

The power plant will source liquefied natural gas from a pipeline connected to a dedicated floating storage and regasification unit. The construction of a 33-km transmission line will connect the power plant to the existing electricity transmission network, converting the sourced LNG to power. The plant is part of Brazil's strategy to complement its hydro-based energy system with thermal power, creating a more reliable energy supply.

The White & Case finance deal teams consisted of the project finance team, led by partners Sean Goldstein and John Anderson, and associates John Donaleski, Julia Bell, Peter Dagher, Sean Williams and Jia Ying in Mexico City, São Paulo and New York, and the capital markets team, led by partner John Vetterli and associates Rafael Roberti, Cesar Briceno Lopez and Yana Shneyderman in New York, and were assisted by other offices throughout the White & Case global network, including partner Ned Neaher in Washington, DC, partner Mark Castillo-Bernaus and associate Dina Elshurafa in London and partner Brendan Quinn, counsel Candice Ota and associates Christina Koravos and Toby Breheny in Melbourne.

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