KDEC 9675 - Debt Capital Markets: EU Legal and Regulatory Framework
This course explores the legal aspects of capital market transactions in the EU from different angles. Capital market transactions involve creating, transferring and mitigating the credit risk that arises from lending money to borrowers. The course has three main themes that correspond to these economic functions: risk origination, risk transfer and risk mitigation.
The course will also examine the latest developments and trends in the capital markets sector, such as ESG/sustainable finance and digitalization.
Risk origination
Credit risk is generated when a lender provides money to a borrower, either as a loan or as a debt instrument. The course will cover various debt financing structures, the regulatory framework for debt issuance and loans, and the market standards for drafting the documents that record the risk origination process (such as prospectuses for debt instruments and loan agreements).
Risk transfer
Transferring risk involves selling the risk relating to a capital market transaction to other market participants. Three sessions of the course will be dedicated to the examination of specific legal structures facilitating the transfer of risk from an originator to a secondary market investor: securitisation transactions, CLOs and covered bonds structures.
These sessions focused on this pillar will delve on the applicable legal framework to these structures, the legal documentation used to document these structures and the role of third parties (like rating agencies, auditors, legal advisors, agents, etc.).
Risk mitigation
Derivatives are transactions that can reduce the risk faced by originators and secondary market investors on capital market transactions. Contractual features that can mitigate risk include set-off, netting, security/margin arrangements and clearing of transactions.
Sessions dedicated to this pillar will examine the EU and national legal framework that governs such transactions and the contractual tools that document them.
Market trends and evolutions
The challenges of our time are also present in the legal financial sector. Two major topics impacting the legal financial sector are ESG/sustainable finance and digitalization. The last two sessions will therefore focus on these two dominant trends.
The session on fintech and DLT will enable students to understand, put into context and use the main techniques of financial and securities regulation in the context of the digitisation of the financial world such as distributed ledger and smart contract automation.
The session on ESG will introduce the concept of sustainability reporting and the legal framework applicable to responsible investing. We will also evaluate from a legal point of view the potential benefits and challenges of firms disclosing ESG information, including the risk of greenwashing. The participants will learn about existing and emerging ESG regulations and frameworks for ESG performance metrics.
The final session will complete the course with a practical exercise focused on preparing legal opinions typically issued by legal counsel involved in a capital market transaction (acting either for an issuer or an investor of such debt issuances).
The course aims to equip students with the practical skills and knowledge needed to work in the banking & finance department of an international law firm. The course will cover the EU law and regulations relevant to the debt capital markets, as well as the general principles and international standards that apply to such transactions. The course will also adopt a comparative approach to highlight the similarities and differences between national capital markets in the EU.
The course assessment will be made on the basis of individual participation (25%) in class and final examination (75%). Students are expected to participate in the course on the basis of the course material being shared ahead of the class.
The course will be given in the form of a 24h seminar.
G. Fuller: Law and Practice of International Capital Markets (3rd edition)
Additional material will be referenced with the relevant lecture. Slides and work material (like legal opinion templates, publically available prospectuses and standard loan and debt documentation) will be shared ahead of the relevant sessions.