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Although it has undeniable advantages for the Company, the Bond Offering process will involve costs that must be considered.
The total direct cost of the transaction varies depending on the size of the fundraising, the structure of theoffer, the context, and the choice of advisors. It comprises the fees due to the various advisors, including the Placement Financial Intermediary(ies), the stock market operator and the Regulator. To these costs accrue any marketing costs (road shows, media publications, etc.).
Furthermore, indirect costs (such as management time dedicated to the Bond Offering process) should not be underestimated.
Based on financial information available from Portuguese listed companies, the average total cost of a public bond offering tends to be within the range of 1.5% – 4.8% of the total amount of funds raised.
Typically, the larger the offering, the higher the costs in absolute terms. Nevertheless, in relative terms, usually they represent a much smaller proportion of the value of the offer proceeds compared with small-sized offerings.
The main costs of Bond Offering process are as follows:
Commissions due for financial advisory services and the placement of bonds are one of the largest fees of a Bond Offering and are negotiated on a case by case basis between the parties.
The commissions charged depend on the offering size, the type of bonds being offered, the nature of the placement/underwriting commitment (if any), the Company’s business nature and state of development and the current market condition. Often this commission involves a fixed fee as well as a success fee dependent on the amount raised.
Legal advisory fees
Legal fees are incurred for assisting the Company in any required internal restructuring, conducting the legal due diligence, preparing/reviewing of all legal documents required for the Bond Offering, including the Prospectus or Information Document, drafting and reviewing of contracts, such as the underwriting agreement. Once more, the fees will vary depending on the complexity of the Public Offering, the Company structure, level of restructuring required and documentation necessary.
Auditing and accounting fees
Auditing and accounting fees are incurred for audits of the Company’s financial statements required to be included in the Prospectus, the auditors’ review of the related documents, and comfort letters to support underwriters. The costs will vary depending on the additional information required to be audited, the nature of the existing accounting issues and whether financial forecasts and pro forma financial statements will be needed.
Advertising / PR fees
The Company may also hires a PR/IR adviser with experience in guaranteeing appropriate communication with the media and retail investors, who charges fees that may vary depending on the types of investors the Company is looking to attract. These fees may relate to publication and announcements needed for compliance with legal obligations, but can also include an advertising campaign across different press and media channels, to attract the largest possible number of potential investors.
The CMVM charges fees for the appraisal of the documentation subject to its approval:
The fixed fees referred above shall be paid upon request for appraisal of the Prospectus and advertising.
The Company that applies for admission to trading of its bonds shall pay any fees charged by stock market operator according of the exchange.
Listing and admission fees
Euronext charges the following initial admission fees for bonds:
Centralisation fees
In the event that a Centralisation of Public Offerings for the distribution of bonds is held, a service fee may be payable by the Company corresponding to 0.03% of the total amount centralized, with a minimum fee of €10,000.
Check more detailed fees charged by Euronext here.
Registration fee
The fees charged for each registration of bonds in the Centralized Securities System, for each issue or series of bonds are:
Check more detailed fees charged by Interbolsa here.
