The HBOR gained much popularity among issuers, especially for high-yield and more complex structured issues, for which preparing and registering a retail registration statement with the SEC did not add much value, given their natural focus on institutional as opposed to retail investors. Although overall 144A issuance has accounted for about 20 to 30 percent of total corporate bond issuance over the last 15 years, in the high-yield segment, 144A issuance represented an average of 72 percent of total issuance.<sup>58</sup> The regime has added considerable liquidity to the private placement market,<sup>59</sup> maintaining certain investor protections while facilitating speed to market, all of which has contributed to the growth of the U.S. corporate bond market.

|**Key Featu**<br>|**res of the Hybrid Offer Regime**<br>|
|---|---|
|**Official name of the HBOR or**<br>**regulation and year of adoption**|Section 4(a)(2) of the 1933 Act, Regulation D, 1982 and Rule<br>144A, 1990|
|**Nature of the regime**|Private placement with secondary market trading|
|**Relative importance of the regime**<br>**(percentage of total issuance, 2010)**|28% in 2010, 24% in 2013<sup>60</sup>|
|**Key conditions for initial offering**|Sales made to initial purchaser (who acts in a capacity similar<br>to an underwriter) based on an exemption or safe harbor, such<br>as Section 4(a)(2) or Regulation D. Typically the initial<br>purchaser is an accredited investor with the intention to sell to<br>QIBs.<sup>61</sup>|
|**Does the regime require submission**<br>**of**<br>**a**<br>**_full_**<br>**_prospectus_**<br>**to**<br>**the**<br>**regulator/SRO?**|No|
|**Does the regime require submission**<br>**of any kind of offer document or**<br>**information**<br>**notice**<br>**to**<br>**the**<br>**regulator/SRO?**|No, unless the private offering is made in reliance on Reg D|
|**Type of document to be submitted**<br>**and timing of submission**|If the private offering is made in reliance on Reg D, the issuer<br>is required to submit Form D to the SEC, which is a short<br>document with basic information about the issuer and the<br>offer. The submission is made only for information purposes.<br>In practice, most hybrid offer issuers provide investors an<br>offeringmemorandum that is often comparable to the amount|

> 58 Source: Thomson Financial (Thomson One Banker-Deals Module), SIFMA, and World Bank calculations. 59 In relative terms, given the generally less liquid nature of debt markets002E

> 60 Source: Thomson Financial (Thomson One Banker-Deals Module), SIFMA, and World Bank calculations.

> 61 Because the U.S. HBOR is constituted by the combination of the pure private placement regime (Regulation D or Section 4(a)(2) of the 1933 Act) and the resale of private securities (Rule 144A), the key conditions for the HBOR are derived based on offers that are ultimately targeting the 144A treatment, or are intended to be sold to QIBs.  The private placement regime on its own stipulates that securities can be sold to an unlimited number of accredited and up to 35 sophisticated investors. Thus, offers targeting the 144A treatment are initially purchased by an underwriter, typically an accredited investor, with the intention of distributing the securities to QIBs. The QIB definition is stricter than that of accredited investors.

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