General Principles
& Funding Complexities

There are several reasons why it might be beneficial for a company to consider raising money in a foreign capital market:

• Reduced Interest Rates: issuing debt across borders allows issuer to benefit from low interest rate environments in foreign markets and lowering their cost of funding.

• Investor Diversification: the corporate finance plans of many issuers includes investor diversification as a core funding principle. The issuer could also desire to issue cross-border to tap a pool of investors that cannot be reached directly with an issuance via the ICSDs. For example, certain pension funds in certain jurisdictions cannot hold their assets in a foreign clearing system. Issuing debt in the investor’s local clearing system is a solution to this.

• Strategy and Marketing Considerations: issuers might want to be present in foreign capital markets to honor a strategic commitment to investors or because their international competitors offer investment options to cross-border investors in a specific reason.

• Funding local operations: many corporates have significant economic ties to foreign countries as a consumer market, operational hub, and/or manufacturing centre. Raising local currency in that foreign market can simplify cash flow operations and reduce potential currency risk.

• Market Innovation: being the first foreign issuer to enter a specific market using an innovative financial structure might fit well with the ambitions of the issuer.

However, there might be 2 hurdles this issuer has to clear:

• The foreign capital market might not have the necessary infrastructure or procedures to handle debt issued by a company in another jurisdiction

• Once market access has been obtained, the investors purchasing the foreign debt will be confronted with withholding tax on the cross-border income on the debt

One of Acupay’s core businesses is to clear these hurdles.