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Ensuring a smooth transition in capital markets after COVID-19

Regime changes to the capital markets space – intended to provide relief in the age of coronavirus – will have to be managed properly by lawyers as we look towards a post-pandemic world.

user iconJerome Doraisamy 06 May 2020 Big Law
Sydney
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In late March, the advent of the global coronavirus pandemic was expected to bring about “substantial increase” in capital markets activity, predicted Gilbert + Tobin’s Adam D’Andreti.

Now, as the professional realm begins to consider what a post-pandemic world will look like, lawyers in this space must help ensure the transition out of the economic downturn is as smooth as possible.

The new temporary capital raising relief measures – brought about by ASIC and ASX as a result of COVID-19 – will allow many issuers to utilise capital raising structures that may not have been available for the said relief.

“For example, issuers now have the opportunity to undertake larger sized placements coupled with an entitlement offer or follow-on SPP. This change is particularly important in the current volatile market as placements have the advantage of being able to be done quickly and strategically, helping underwriters manage their risk and issuers to get urgently needed capital,” said King & Wood Mallesons special counsel Amanda Isouard.

“It is important that law firms are advising issuers and underwriters of these new possibilities and the advantages and disadvantages of each, in addition to the other alternative equity investment structures (e.g. introduction of strategic or cornerstone investors).”

The changes, Sparke Helmore partner Sally Weatherstone believes, may be here to stay “and with a broader application”.

Regardless of the lifespan of the measures, there are a number of steps that law firms must take, in conjunction with their clients and legal departments to ensure that the transition to a post-pandemic world is smooth, Ms Isouard said.

“It is important that firms advise issuers and underwriters of the new temporary relief measures and what conditions have to be met in order to rely on the relief. Early engagement with ASX in respect of the use of either or both of the temporary ASX class waivers should be factored into transaction timetables,” she outlined.

“Offer structures, disclosure materials and underwriting agreements will also need to be revisited to ensure they capture the relevant points of the temporary relief measures. As we look towards the post-pandemic world, we think there will be some permanent impacts – particularly around the ways that investors are ‘sounded’ before deals and the degree to which placements are made pro rata.”

This is not to say, however, that there will not be hurdles to overcome for lawyers in this space, Ms Isouard added.

A key challenge will be helping clients who are already stretched managing the rapid changes to their businesses and personal lives navigate the complexities of preparing for a capital raising in a volatile and unpredictable market,” she advised.

“Another area of focus will be working with clients to identify key areas of risk in the business and translating that into effective disclosure to the market.  Regulatory developments and market practice will continue to evolve at a rapid pace over the coming months, so it is important that ECM lawyers keep on top of that.”

However, the lawyers in this space will certainly not be without work, Ms Isouard added – just as was expected at the outset of the pandemic.

“We are expecting the current economic environment, coupled with the temporary capital raising relief provided by ASX and ASIC, to facilitate a flood of capital raisings over the coming months,” she concluded.

“This should lead to greater deal flow for ECM lawyers.”

Jerome Doraisamy

Jerome Doraisamy

Jerome Doraisamy is the editor of Lawyers Weekly. A former lawyer, he has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. He is also the host of all five shows under The Lawyers Weekly Podcast Network, and has overseen the brand's audio medium growth from 4,000 downloads per month to over 60,000 downloads per month, making The Lawyers Weekly Show the most popular industry-specific podcast in Australia. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of Minds Count.

You can email Jerome at: This email address is being protected from spambots. You need JavaScript enabled to view it. 

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