Debt placement agent - Book runner
The debt placement agent is a bank or group of banks that guarantee to achieve the best possible result in a debt or equity issue in the primary market. It is a term widely used in investment banking. It is also known as a book runner
The figure of the debt placement agent participates in the capital markets, and is highly valued and received by institutional investors. Among its many functions are to give the issuer the best possible price and a well diversified investment base.
The work of the tilers (book runners) can be done in three ways:
- Order book method: Investors' requests are noted in an order book.
- Underwriting method: In this case, the underwriting banks buy the bonds or shares from the issuer, and then place them among investors. Therefore, the risk is assumed by the banks exposing themselves to market fluctuations (later selling in the secondary market at a higher price) and the issuer at the same moment closes its financing at the agreed price.
- Bridging loan: when the two previous methods are used.
In investment banking, the normal thing is that this process is carried out by a bank syndicate (several banks at the same time), to diversify risks and reach a larger investor base. These unions are responsible (depending on the method used) for the placement of the debt or shares. The underwriter figure frequently assigns parts of the issue to other banks to carry out the process of attracting investors.
The roadshow: expanding the investor base
Once the investor has assigned a bank or several banks as underwriters, they have the mandate to hold meetings, presentations, conferences, etc., that is, the roadshow.
These actions carried out by the underwriters are neither more nor less than to attract investors, expand the investor base and publicize the issue. The more people who attend the broadcast, there will be a greater demand and the price will be higher.