SGX - Consultation Paper On Initiatives tTo Improve Retail Access To Debt Securities: Trust Deed Requirements

Singapore Exchange (SGX) today issued its response to a consultation paper it published in September 2014 to give retail investors improved access to wholesale bonds1. Wholesale bonds are initially denominated in a board lot size of S$200,000 or above. In the public consultation, SGX proposed that retail investors be allowed to purchase these bonds six months after their listing in smaller board lot sizes (“seasoned bonds”). Issuers can also make subsequent offers of new bonds on the same terms as the seasoned bonds to retail investors directly.

SGX thanks all respondents for their feedback. Based on the feedback received, and to allow retail investors to tap a greater diversity of seasoned bonds while maintaining high disclosure, listing and solvency standards, SGX will make the following key modifications to the framework:

• Lower the minimum issue size for the initial offer to institutional investors and accredited investors from S$300 million to S$150 million.
• Reduce the threshold for a company’s aggregate amount of bond issuance over the past 5 years on SGX from S$750 million to S$500 million.
• Shorten the ‘look back’ period of the issuer’s financial position from 5 years to 3 years, but require, on average, a positive net operating cash flow.

Companies which issue bonds to be seasoned must satisfy the qualifying criteria as detailed in Annex A.
In addition, SGX today began a related public consultation on proposed amendments to the listing rules relating to trustee and trust deed requirements. These changes arise from feedback received in the September consultation and are necessary to ensure continued relevance in meeting market needs. SGX is consulting on the following:

• Apply the appointment criteria under the Securities and Futures Act to trustees of retail bonds (including bonds to be seasoned).
• Require the trust deed to contain a covenant binding the trustee to exercise due diligence and vigilance in carrying out its duties.
• Streamline the continuing listing obligations, in particular for issuers listed on SGX that are also seeking a listing of their retail bonds.

Market participants and members of the public can send in their comments and suggestions on the proposed contract from today until 23 January 2015.