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Capital Markets

The calculation kings: how ConvEx sorted out a CB muddle

Tackling a pain point in European convertible bonds has allowed a group of former UBS bankers to build an interesting business

Calculation agent: it might not sound like something to get the blood racing, but it is at the heart of one of the biggest changes in Europe’s convertible bond market in the past decade.

For every single deal, someone has to work out how any corporate action by an issuer might affect the number of shares a bondholder will receive. And that’s just for starters. With all their bells and whistles, equity-linked instruments are decidedly high-maintenance products.

Until 2012 there simply was no dedicated calculation agent in the equity-linked market. About one-third of issues – mostly German deals – had someone formally designated to carry out the role, typically the paying and conversion agent.

But their expertise tended to lie elsewhere, in moving money and stock from A to B – an equally vital, but quite different, role.

Enter ConvEx Advisors, a firm set up in 2012 by Mark Dalton, a former head of structured equity capital markets at UBS. He originally conceived of the firm as an adviser to corporate equity-linked issuers, along the lines of what he had been doing in his 11 years at UBS. What evolved was a little different to that.

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