Identification of stakeholders

What could be more obvious for a borrower than to know the identity of the investors who have contracted their bond debt?

However, while the original bond book provides such information only at a specific moment in time, the transfers made in the secondary market by investors, in line with their portfolio rationalization strategies, structurally and mechanically alter the identity of the bondholders.

The procedure for Identifiable Bearer Securities (TPI) operated by Euroclear addresses this issue, but only partially, as it requires time (approximately 15 days) and, consequently, may prove entirely ineffective in the event of new transfers in the secondary market between the initiation of the TPI and the receipt of results.

This notion of time is particularly critical, especially in the context of the obligation to hold an Extraordinary General Meeting for structuring operations (acquisitions, partial transfers, organizational changes, etc.) or restructuring, which require the necessary quorum and the approval of a two-thirds qualified majority vote of the bond creditors, often within a tight timeframe.

It is evident that for such operations to be successful, it is essential not only to be able to identify the investors in advance but also, if necessary, to contact them and persuade them to vote (to achieve the quorum).

Thus, regardless of the size of the bond issue (national, European, or even international), the task of identifying bondholders is of paramount importance in the life of issuing companies, which may not have the internal resources, time, or expertise to carry out this task.

In this context, engaging seasoned specialists in bondholder identification is particularly crucial to ensure the success of the planned operation, influenced by:

• Their experience in previous operations, with an identification rate significantly exceeding the quorum required for a General Meeting,
• Their knowledge of the "usual suspects" (national, European, and international investors),
• Their understanding of the mechanisms of voting systems and processes (centralizing agents, voting procedures, and counting in General Meetings),
• The development of intuitu personae relationships with investors that facilitate simple, rapid, and effective exchanges.

In conclusion, the exercise of identifying bondholders can be a critical success factor for issuing companies, provided it is managed effectively at all stages of the process, thereby maximizing the identification rate.