Jurisdiction - Singapore
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Singapore – SGX And MAS Issue Consultation Papers On Bond Listings.

20 November, 2014

 

Legal News & Analysis – Asia Pacific – Singapore  Capital Markets

 

The Singapore Exchange (“SGX”) and the Monetary Authority of Singapore (“MAS”) have proposed changes to the regulatory regime for bond offerings. In brief, these are as follows:

 

  • The SGX is proposing to allow retail investors to purchase bonds that were initially acquired by institutional and accredited investors through secondary trading on the SGX Mainboard after a six-month period (“Seasoning Framework”); and
  • The MAS is proposing to exempt issuers that meet specified criteria from prospectus requirements for offers of plain vanilla bonds.

The last day for feedback was 30 September 2014.


Scope


Both of the proposed changes will only apply to plain vanilla bonds which meet the following characteristics:

 

  • have a fixed term not exceeding 10 years;
  • provide for repayment of the principal sum at the end of the fixed term;
  • have periodic interest payments which cannot be deferred;
  • carry a fixed interest rate or floating rate of interest comprised of a reference rate plus a fixed margin which cannot be decreased;
  • are not convertible into or exchangeable for other securities;
  • are not asset-backed securities or structured notes; and
  • are unsubordinated.

 

The bonds must be listed and traded on the SGX. The scope excludes convertible bonds, perpetual bonds, and other hybrid instruments.


Issuer And Trustee Requirements


In order to be able to avail itself of the Seasoning Framework, an issuer must meet requirements as to size, listing, and credit as set out below:

 

  • Size Test: The issuer must have a market capitalisation of SGD 1bn or have net assets of SGD 500m.
  • Listing Test: The issuer’s equity securities must have been listed on the SGX or a recognised securities exchange for at least five years, or it must have listed, or guaranteed the issuance of, bonds on the SGX for at least five years.
  • Credit Test: The issuer must satisfy one of the following:
    • It has not recorded a net loss over the previous five years;
    • It has a credit rating of BBB or higher, or the bonds to be offered are rated BBB or higher; or
    • It has listed, or guaranteed the issuance of, bonds listed on the SGX of at least SGD 750m over the previous five years.

An issuer is also able to avail itself of the Seasoning Framework if it is the wholly-owned entity of a guarantor that satisfies these criteria.


The SGX also proposes that for debt securities that are to be issued under the Seasoning Framework, the trustee to be appointed must meet the requirements applicable to trustees and trust deeds under rule 308 of the Listing Manual.


Offer Under The Seasoning Framework


An offer of bonds under the Seasoning Framework must have an initial minimum principal amount of SGD 300m in the initial issuance to institutional and accredited investors. The issuer should prominently disclose its intent to season the debt securities in the offer documents to the accredited and institutional investors.


This initial offering circular will be made available to investors by the SGX on its website. The SGX will host this and other information about the issuer and the debt securities on a dedicated webpage. The other information to be made available will include:

 

  • historical bond prices;
  • announcements made by the issuer on the bonds; and
  • any other documents issued in relation to the seasoned bonds.

 

The SGX also proposes to provide the daily calculated fair value of the bonds for at least six months after they are listed in order to enhance price transparency and to facilitate price discovery when the debt securities are seasoned.


Re-Tapping


Under the Seasoning Framework, an issuer may also make additional offers of new bonds to retail investors on the same terms of the offer to the institutional and accredited investors six months after the initial offer (“retapping”). The aggregate amount of bonds offered through such re-taps cannot exceed 50% of the size of the initial offer. The issuer should have also have prominently disclosed in the offer documents to the accredited and institutional investors that it has the option to offer a re-tap issue to retail investors and the maximum size of the re-tap.


Once the issuer decides to conduct a re-tap on an existing seasoned issue, it must make a SGXNet announcement of the re-tap containing the following details:

 

  • Terms of the debt securities to be issued;
  • Dates relevant to the re-tap exercise; and
  • Mode of subscription for the debt securities issued under the re-tap.

The MAS proposes to grant a prospectus exemption for the re-tap. The issuer must, however, provide investors with a product highlights sheet which sets out the key features and risks of the bonds offered in a clear and concise manner. Updated or supplemental offer documents may be issued to reflect changes relating to the issuer or terms of the debt securities. Issuers may invite subscriptions to the debt securities offered during a re-tap through placements via brokerage firms and subscription via automated teller machines.


Prospectus Exemption For Exempt Bond Issuers


As noted above, the MAS is also proposing to exempt issuers that meet specified criteria from prospectus requirements for offers of plain vanilla bonds. In addition to being able to satisfy the size test and listing test under the Seasoning Framework, the issuer or guarantor must also meet the following credit requirements:

 

  • It must have a credit rating of AA- or higher, where the rating is done by an international credit rating agency; or
  • The bonds to be offered are rated AA- or higher, where the rating is done by an international credit rating agency; or
  • The issuer/guarantor has listed, or guaranteed the issuance of, bonds listed on the SGX of at least SGD 1bn over the previous five years.

 

An offer to retail investors made pursuant to this exemption must also meet the following conditions:

 

  • The bonds offered pursuant to the exemption must be listed and traded on the SGX;
  • The offer must comprise tranches to both institutional/accredited investors and retail investors;
  • A product highlights sheet must be provided to retail investors;
  • A simplified disclosure document must be provided to both institutional/accredited investors and retail investors; and
  • The product highlights sheet and the simplified disclosure document must be lodged with the SGX and made available to investors on SGX’s website.

 

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For further information, please contact:

 

Choon Yuen Hui, Partner, WongPartnership
choonyuen.hui@wongpartnership.com

 

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