Ashurst Quarterly Debt Capital Markets Update – Q3 2023
11 October 2023
11 October 2023
Welcome to the last edition of the Ashurst Quarterly Debt Capital Markets Update for 2023. In this edition, we summarise the key developments in debt capital markets in the third quarter of 2023.
We have a number of different developments to report on in this edition:
The Financial Services and Markets Act 2023 received Royal Assent on 29 June 2023. The FSMA 2023 is an important statute, which makes provision for a number of fundamental reforms to the UK's legislative structure and establishes a framework for the revocation of onshored financial services legislation. It also makes interim changes to various onshored rules. For more information, see this Ashurst briefing.
On 3 July 2023, the FCA published a press release confirming that US dollar LIBOR set by reference to the quotations offered by a panel of banks, an integral feature of the international capital market since the 1970s, came to an end on 30 June 2023, marking the final cessation of LIBOR rates for any currency set by reference to panel banks' quotations.
One-month, three-month and six-month US dollar LIBOR calculated on a synthetic basis (as CME Term SOFR for the relevant tenor plus the applicable ISDA spread) will be available for use in legacy contracts only until 30 September 2024. These settings have been designated as Article 23A benchmarks under the UK Benchmarks Regulation and will be published by LIBOR's administrator, ICE Benchmark Administration Ltd (IBA).
On 7 July 2023, the European Commission's Recommendation ((EU) 2023/1425) on facilitating finance for the transition to a sustainable economy was published in the Official Journal. It contains an explanation of what the Commission understands by "transition finance" – namely, the financing of climate- and environmental performance improvements to transition towards a sustainable economy, at a pace that is compatible with the climate and environmental objectives of the EU. The Recommendation aims to support market participants that wish to obtain or provide transition finance by offering practical suggestions on how to approach transition finance and explaining the use of sustainable finance tools for this purpose.
On 11 July 2023, HM Treasury published the response to its December 2022 consultation paper (the so-called "Edinburgh Reforms") in which, amongst other things, it set out its intention to repeal the UK PRIIPs Regulation regime and replace it with a new framework for retail disclosure (see this Ashurst briefing)
As the responses received were almost universally supportive of the government's proposals, the government will now move to revoke entirely the UK PRIIPs Regulation regime and replace it with a new UK-specific retail disclosure regime via FCA rules. The government says that:
On 11 July 2023 ESMA issued a Public Statement (ESMA32-1399193447-441) on sustainability disclosure in prospectuses (both equity and non-equity). Its intention is to promote coordinated action by competent authorities, issuers and advisers regarding the sustainability-related disclosure that should be included in prospectuses under the current legislation. For more information see this Ashurst briefing.
On 14 July 2023, the European Commission adopted a delegated regulation extending until 31 December 2025 the EU Benchmarks Regulation transitional period during which EU supervised entities can use third-country benchmarks that are not on the ESMA register. Approval of the regulation is likely to be fast-tracked given the current 31 December 2023 deadline. For more information, see this Ashurst briefing.
The UK government is creating a new UK prospectus legislative regime which will ultimately replace the current EU-derived prospectus laws. On 11 July 2023 this process took a major step forward with the publication of a "near final" draft of the proposed Public Offers and Admissions to Trading Regulations 2023. This Ashurst briefing discusses the implications of the proposed new Regulations on issues of non-equity securities in the international capital market.
With effect from 28 July 2023, the FCA has revoked the requirement that the annual financial report required by DTR 4.1 of its Disclosure Guidance and Transparency Rules (DTRs) must be prepared using the European single electronic reporting format (ESEF) specified in Commission Delegated Regulation (EU) 2019/815. In its place the FCA has put the key provisions directly into the DTRs. This aligns with the UK Government’s general approach to revoke retained EU regulations and replace them with regulator rules (for more details see FCA Consultation Paper CP23/2).
On 26 September 2023 ICMA and the Executive Committee of the Principles published an updated version of the Q&As related to Sustainability-Linked Bonds (previously published in 2022). They are published on ICMA’s website in the form of a stand-alone document, replacing the 2022 version, and will be integrated at a later stage to the Guidance Handbook. This additional guidance illustrates and complements the Sustainability-Linked Bond Principles.
Visit our Finance Hub for analysis and commentary on developments affecting global financial markets, including the EU Prospectus Regulation, the EU Benchmarks Regulation, PRIIPs/KID, EU EMIR and LIBOR transition.