While the terms of a particular bond offering may vary, a bond offering consists of a number of standard legal documents. The key parties in a bond offering include the company, the company’s counsel, the underwriters (sometimes referred to as the initial purchasers), underwriters’ counsel, the trustee, the transfer agent, and the company’s auditors. The key phases of a bond offering are launch, pricing, and closing.

Prior to launching a bond offering, due diligence must be completed. The company will upload back-up support materials to a virtual data room that support the factual statements being made in the offering memorandum. Underwriters’ counsel will take the lead in reviewing the diligence materials and confirming that adequate support has been provided. A management diligence call, auditor diligence call, and legal diligence call will typically be conducted by underwriters’ counsel prior to launch. On these calls, the company’s management team or auditors will answer a series of diligence questions.

Prior to launch, the company will also work with the underwriters to prepare an investor presentation. The investor presentation will include a legal disclaimer slide that states that the presentation is for informational purposes only and does not constitute a solicitation of an offer to buy securities.

The main document involved in launching a bond offering is the offering memorandum. This is a 200-300 page document that contains extensive disclosure about the terms of the bond offering and the intended use of proceeds from the bond offering. The offering memorandum also contains a description of the company’s business, risk factors, and a table summarizing the company’s capital structure. The company will issue a launch press release to publicly announce the offering. A Form 8-K will also be filed with the Securities and Exchange Commission (SEC) announcing the launch and attaching the press release as an exhibit.

The next major milestone event after launching a bond offering is pricing. Pricing involved execution of the purchase agreement, a document signed by the company and the underwriters. The purchase agreement contains a number of representations and warranties made by the company and the underwriters.

An annex to the purchase agreement includes the form of lock-up agreement. This form will be used for preparing the lock-up agreements signed by the company’s directors and executive officers. By signing a lock-up agreement, each director and executive officer is agreeing not to sell the company’s securities for a specified period of time, usually for 30-90 days following the closing of the bond offering. The lock-up period is heavily negotiated. While company insiders may want a shorter lock-up period, the lock-up period can help prevent excessive volatility in the stock price following the offering.

Closing usually occurs a few days after pricing. Typical closing documents include:

• Authentication Order: A document from the company to the trustee. The authentication order directs the trustee to authenticate the notes, cause of the delivery of the notes to the Depository Trust Company (DTC), and for the trustee to retain the notes by acting as custodian for the DTC. The authentication order is signed by the company.
• Compliance with Authentication Order: A document from the trustee to the company confirming that the trustee has authenticated the notes, caused the delivery of the notes through DTC, and that the trustee is holding the notes as custodian for DTC. This document is signed by the trustee.
• Cross Receipt: A document from the underwriters to the company in which the underwriters acknowledge receipt through DTC of the notes. In the cross receipt, the underwriters also acknowledge that they have wired funds to the company for the purchase price of the notes. The cross receipt includes an acknowledgment by the company that it has received payment of the purchase price. This document is signed by both the underwriters and the company.
• Officer’s Certificate pursuant to the Purchase Agreement: A document signed by the CFO or other key officer of the company making certain certifications with respect to the accuracy of the statements in the purchase agreement.
• 10b-5 Letter: The company’s counsel and underwriters’ counsel will each deliver a separate 10b-5 letter stating that the offering memorandum does not contain any material misstatements or omissions.
• Legal Opinions: The company’s counsel and underwriters’ counsel will each deliver a separate legal opinion stating that they have reviewed the key bond offering documents and believe that the documents have been duly authorized, executed, and delivered by the applicable party.