Investment Banks & Capital Markets

Investment Banks use PRI (currency inconvertibility and non-transfer coverage) to mitigate country risk on capital markets securities offerings by emerging market issuers. This customized capital markets PRI coverage enables an issuer to:

• mitigate currency inconvertibility and exchange transfer risk in cross border bond or notes issues;

• achieve a credit rating higher than the sovereign rating when issuing debt internationally; and

• expand the potential investor pool by providing a rating at a certain eligibility level (generally investment grade).

Sovereign’s underwriting activities in the capital markets arena have been focused primarily on 144A bond issues and rated private placements by issuers based in sub-investment grade emerging markets. Sovereign’s PRI support can often enable issuers that carry investment grade local currency ratings to pierce the “sovereign ceiling” and obtain investment grade ratings on their bond issues by mitigating the cross-border currency transfer and convertibility risk.

This PRI enhancement to investment grade can result in significant cost savings to the issuer, as well as improving access to private capital and opening up opportunities with institutional investors. Sovereign has worked with all the major rating agencies and these agencies are familiar with Sovereign’s policy form and financial strength ratings.

The PRI protection on these debt issues normally covers between 12 and 36 months of interest against the risks of currency inconvertibility and nontransfer. Sovereign’s capital markets coverage is available for tenors up to 15 years and amounts of up to $80 million.

Case Studies:

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Investment Banks & Capital Markets)

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