Deal Process: From Mandate to Closing
How does a bond deal start and end? From mandate selection through roadshow, book-building, pricing, allocation, and settlement — this chapter dissects what bankers, issuers, and investors actually do at each stage, in a real-world timeline. Everything behind how an IG deal closes in 72 hours.
Why Understanding the Deal Process Matters
Bond issuance looks like a simple transaction — an issuer sells bonds and investors buy them. But beneath that surface lies weeks of coordination among dozens of specialists. Mandate selection, legal documentation, demand assessment, pricing, allocation, settlement — each stage is independent yet tightly linked to every other.
Understanding this process illuminates what DCM bankers actually do. Why bankers check Bloomberg at 5am, why scheduling a roadshow takes days of negotiation, why the order book gets updated every two hours on deal day — all of it lives within this timeline.
It also provides a framework for analyzing what goes wrong when deals fail — and how deals survive crises, like the 1998 Korean sovereign bond issued in the eye of the IMF storm.
Six-Stage Deal Timeline
Mandate to settlement — participants, outputs, and practitioner insights at each stage
Mandate
T-60 to T-30The issuer identifies a funding need and requests pitches from multiple banks. Each bank proposes structure, timing, expected spread, and distribution strategy. The issuer selects 1–3 lead managers (book runners).
Pitch core is 'comparable analysis' — comparing recent spreads of similar issuers vs expected spread for this deal
Preparation
T-30 to T-5Issuer and lead bankers jointly prepare investor presentations (public materials). Legal counsel drafts the Prospectus/Offering Circular; the issuer completes legal and financial due diligence. Lead bankers conduct preliminary demand assessment (pilot fishing).
Pilot fishing is an informal check with 5–10 key investors on demand and spread levels — it's a risk management tool to pull the deal early if demand is insufficient
Roadshow
T-5 to T-2Issuer management and bankers meet key investors to explain business, financial strategy, and bond purpose. Virtual roadshows are now standard — global investor meetings completed in 1–2 days. Bankers monitor investor interest in real time during the roadshow.
Three questions investors always ask in roadshow: ① What will you do with the proceeds? ② How will you respond if financial ratios worsen? ③ What NIC are you offering versus your existing bonds?
IPT → Book-Building
Deal day AM (2–4 hrs)IPT (Initial Price Thoughts: initial price guidance) is announced to market. Example: 'T+180bp area'. Investors submit orders; book-building runs. If demand is sufficient, the spread tightens to a final guidance announcement. Target coverage is 2–5x (orders vs. deal size).
Book quality matters as much as size — high Real Money = stable deal, high HF = fragile book
Pricing & Allocation
Deal day PM (2–3 hrs)Final spread and deal size are locked. Allocation is at banker discretion, generally prioritizing ① long-term anchor investors, ② geographic diversity, ③ investor relationships (reverse inquiry considered). Allocation results are communicated to investors by phone/email.
Allocation is a relationship management tool — investors who got good allocations in a good deal provide stable demand in the next one
Settlement
T+2 to T+5On settlement date, investors pay and the issuer delivers bonds. Most international bonds settle T+2 (some T+5). Bonds are registered and deposited in Euroclear or Clearstream. The issuer receives net proceeds after deducting fees (1–5bp management fee + underwriting fee).
Settlement fails are rare but reputationally damaging — bankers re-verify all documents from T+1
Syndicate Structure: Three Roles and Fee Hierarchy
Why do multiple banks participate in a single bond deal? Duties and compensation for each role
Large bond issuances exceed what a single bank's sales force can distribute globally. The syndicate structure overcomes this — multiple banks divide coverage by region and investor type to access broader demand. Simultaneously, underwriting risk (the risk that if the deal fails, banks must purchase bonds themselves) is distributed across the group.
Global Coordinator (GC)
1–2 lead banksOverall deal coordination, final allocation decisions, syndicate management, main issuer contact
Book Runner / B&D
2–5 lead banksOrder book management, investor sales, pricing input, allocation recommendations
Co-Manager
3–10 regional banksRegional investor access, supplementary sales coverage
Fee Allocation Structure (Conceptual)
* Actual allocation varies significantly by deal, size, and performance. Figures above are conceptual examples.
When Deals Get Pulled — The Logic and Cost
A 'pulled deal' occurs when a transaction is cancelled after IPT has been announced. This is not uncommon — in volatile periods, dozens of deals get pulled per quarter. But the cost goes far beyond a simple failed transaction.
Cost of Pulling a Deal
- •Issuer credibility hit — market signal that 'this issuer's bonds are hard to sell'
- •Higher NIC required next time — investors price in a risk premium
- •Legal and preparation costs already incurred — non-recoverable
- •Lead banker reputation damage — 'why did you misjudge the timing?'
Pull vs. Reprice — The Banker's Decision
- →Coverage below 1x + deteriorating market = pull is the right call
- →Coverage 1.5-2x + spread issue = add NIC and reprice
- →Size reduction + spread widening can salvage a 'partial success'
- →Issuer credit event (downgrade announcement) = immediate pull, await market recovery
Practitioner View: For experienced DCM bankers, 'the courage to pull a deal' is itself a competency. A deal forced through to completion that collapses in secondary trading can lock an issuer out of markets for 2–3 years. The principle that long-term relationships matter more than short-term fees applies here too.
Applied Case: Korea 1998 Sovereign Bond Process
Post-IMF Bailout — How a Country With Shattered Credit Issued Bonds
In January 1998, Korea — fresh from receiving an IMF bailout — needed to restore international credibility and secure additional FX. The Ministry of Finance selected lead bankers, but this was no ordinary competitive pitch — the country had to issue to survive.
The roadshow followed traditional mechanics but different substance. The issuer (Korean government) focused on IMF program compliance, fiscal reform commitments, and FX reserve recovery projections. Investor questions were unusual: 'Can you comply with IMF conditions?' 'What's the probability of debt restructuring?'
IPT was announced at 'T+345bp area' — 3.45 percentage points over US Treasuries. Compared to Korea's typical spread of T+30-50bp in normal times, this illustrates the sheer scale of risk premium the market demanded. Yet orders came in, and the deal was completed.
$400M issued successfully. More important than the dollar amount was the signal: 'Korea can access international capital markets again.' This deal's success became a critical milestone in Korea's path out of the FX crisis and restoration of sovereign credibility.
Share this deal
Frequently Asked Questions
Related Content
Was this helpful?
Share it with someone
References
- 1ICMA. ICMA Primary Market Handbook — New Issue Process and Documentation. ICMA, 2024
- 2U.S. Securities and Exchange Commission (SEC). Rule 144A — Private Resales of Securities to Institutions. SEC, 2023
- 3Dealogic. Global DCM Review — League Tables and Market Statistics. Dealogic, 2024
- 4Bank for International Settlements. New Issue Premiums in the Corporate Bond Market. BIS Working Papers, 2022
- 5ICMA. EMTN Programme Guide — Documentation and Execution. ICMA, 2024