Main Takeaway

SFA’s Investor Committee, in collaboration with other SFA members, has evaluated the challenges of the current bondholder communication framework with particular focus on modernizing the voting and consent solicitation process. As a result of this effort, a recommended solution was developed taking into consideration the operational, legal, and regulatory issues within the industry. This document proposes specific criteria for a new bondholder communications platform; see the full proposed criteria here.

Background

The limitations of bondholder communications have been under discussion with issuers, trustees, and regulators since the global financial crisis of 2008. Most structured finance deals are widely distributed, each often involving tens to hundreds of bondholders, and commonly require unanimous bondholder consent for making economically-material amendments. Within the current framework, reaching a quorum when necessary has been nearly impossible and has increased operational expenses. Improved bondholder communications will reduce credit risk and serve as a critical tool for supporting investors over time.

SFA’s Key Points

• Investors believe that all transactions should have a communication platform, disclosed in the prospectus, which supports notifications of transaction parties and authenticated bondholders including the voting process for consent solicitations.
• Access to the platform should be free to investors to encourage participation and avoid bias to smaller investors.
• The platform should provide secure real-time data in a broad range of databases for seamless upload from multiple sources.
• Other requirements for verification and authentication, ease of use, technical support, and messaging between industry participants, are among the many issues addressed in the proposed criteria.