BY CHARLES ABUEDE
Experts in the Nigerian debt capital market have harped on the role corporate trustees play in investors’ protection without jeopardising the interest of a bond issuer in capital market debt issuance.
Akin Oni, head of trust services at STL Trustees, shared this view in his presentation at a recent webinar organised by STL Trustees Limited titled, “The Role of Corporate Trustees in Capital Market Debt Issuances.”
Oni explained that at every point in time when an issuer comes to the capital market to raise capital for various developmental projects or working capital requirements, investors come together to provide the required funding to meet the issuer’s funding need.
He held that it is statutorily required that a corporate trustee be engaged to manage the trust arrangement between the issuer and the bondholders and that the role of the trustee includes, ensuring that the fund so raised is judiciously utilised in line with the use of proceeds as contained in the transaction documents so as not to jeopardise the interests of the investors, ensuring repayment of both the coupon and principal of the bondholders as at when due amongst other critical roles.
Presenting a keynote on “Investor Protection: Role of Corporate Trustees in Debt Issuances,” Oni explained that in a debt issuance transaction, corporate trustees, in a bid to protect the interest of the bondholders must perform the specific roles of documentation, custodianship of relevant legal documentation, supervision of terms and compliance thereof, management of the sinking fund, insurance, valuation, inspection, and where necessary or applicable, ensuring realisation and distribution of assets, rendering necessary reports to relevant stakeholders and taking legal action to defend the assets under trust, among others.
“One of the most critical aspects of a corporate trustee’s role is the documentation. This is because it is what you document that you will execute and without proper documentation, an issuer may get away with so many infractions that could portend potential default in meeting its obligation to bondholders. Hence, it is imperative for a corporate trustee to be well knowledgeable and also have the requisite expertise and capacity to focus on creating water-tight documentation that would ensure a seamless transactional experience for all parties throughout the life of the transaction.”
Funmi Ekundayo, managing director and chief executive officer of STL Trustees, while speaking during the webinar on Wednesday, added that for any capital market to thrive and grow, investors’ confidence in the market is crucial. The CEO also emphasised that the investor’s confidence in the capital market will always be the factor attracting and encouraging them to commit their hard-earned financial resources into the market by way of investment and that the key role of corporate trustees in capital market transactions revolves around the protection of investors’ interests and confidence.