Duncan McGrath leads the Debt Capital Markets and Securitisation team at Gilbert + Tobin, which is a part of their wider Banking and Infrastructure practice. Gilbert + Tobin is Australia’s leading independent top tier corporate law firm and with a focus on dynamic and evolving market sectors, they work on transactions and cases that define and direct the market. They become the legal adviser of choice for industry leaders who value our entrepreneurial culture and determination to succeed and so we speak with Duncan about the Australian markets and the evolving Fintech industry.
When advising banks and overseas companies on issuing bonds into the Australian markets, what are key aspects you must consider?
The key considerations include whether or not the proposed bond issue will be a one-off, or whether the intention is to issue bonds into Australia on a regular basis as licencing issues may apply. If it is a one-off, there ought to be an existing programme under which the bonds can be issued, noting that changes will likely be needed to enable the bonds to be held in registered form in the domestic clearing system, Austraclear, and a local issue and paying agent appointed. If it is planned to issue with some frequency, it would be more economical to establish an Australian domestic programme.
How difficult is it to marry Australian legal requirements with overseas companies’ aims, whilst having consistency of terms across jurisdictions where they operate? How do you overcome these difficulties for your clients?
Typically, an offshore Issuer would follow existing commercial terms from its EMTN Programme when establishing an Australian domestic programme, excluding those terms that would not be relevant including, for example, representations and warranties and undertakings relating to listing as it is uncommon to list bonds on the Australian Stock Exchange (there being no advantage to doing so in term of tax or other regulatory relief). One key representation that would be amended is the disclosure representation which would need to reflect local law. In practice, this does not cause difficulties for Issuers as the disclosure in the Australian market is significantly more limited than offshore; Issuers have no difficulty in getting comfortable with that they meet local law requirements and that such disclosure is not misleading or deceptive, or intended to mislead or deceive.
How different are the challenges posed when advising bigger, international corporations?
Aside from ensuring consistency of terms, a key consideration is often ensuring the relevant internal approvals are obtained (internationally) in good time and co-ordinating conference calls are at suitable hours for all parties!
When advising overseas banks and other investors who want to purchase bonds issued by Australian companies, what are the key issues they need to consider?
The fundamental consideration is whether or not the Issuer has satisfied the “Public Offer Test” under the Australian tax legislation which, if not satisfied, results in an Australian Issuer withholding 10% on payments of interest under bonds to overseas investors. There are various ways by which the test can be satisfied upon the original issue of the relevant bonds and careful consideration is given by Issuers to ensure that the test is satisfied when the original offer is made.
With the financial market everchanging and being unpredictable, how do you keep on top of trends for the benefit of your clients?
We maintain our currency through the international and domestic transactions we work on, through our interaction with clients and through our own review of market developments both in Australia and internationally.
How has the world of Fintech changed the finance and investing industry in Australasia?
The growth of Fintech is changing the finance and investing industry in Australia in a number of areas from peer-to-peer lending platforms to blockchain. These developments aren’t just the preserve of small start-ups but law firms, including Gilbert + Tobin, and major financial institutions and their other advisers are also participants in the space.
