Impact of the Draft German Bill on Issuer-Bondholder Relationships on Convertible and Exchangeable Bond Offerings

In September 2008, the Federal Ministry of Justice will hold a hearing on its draft bill of a Law on Legal Relationships Regarding Bonds and Amendments to the Statute of Limitations in the Area of Capital Markets Law (Referentenentwurf eines Gesetzes zur Neuregelung der Rechtsverhältnisse bei Schuldverschreibungen aus Anleihen und zur Anpassung kapitalmarktrechtlicher Verjährungsvorschriften).  Among other things, the draft bill proposes a comprehensive set of rules for so-called collective action of holder of German law-governed bonds. Though long awaited, the draft bill has so far not received too much public attention by market participants and capital market experts. This may well change in the course of the legislative proceedings following the September hearing. The attached Alert Memorandum focuses on the impact of the proposed rules on convertible and exchangeable bonds, which are subject to German law.