Corporate issuers traditionally look to the wholesale bond market to meet their funding needs due to higher costs involved in tapping the retail market. From today, corporate issuers will find it easier and cheaper to tap the retail market by issuing plain-vanilla bonds through two new frameworks:
First, under the Bond Seasoning Framework, wholesale bonds* released by issuers that meet eligibility criteria stipulated by the Singapore Exchange (SGX) can be offered to retail investors after the bonds have been listed on SGX for six months. These “seasoned” bonds can be re-denominated into smaller lot sizes and offered to retail investors on the secondary market. Eligible issuers can also offer additional bonds to retail investors on the same terms as the “seasoned” bonds without a prospectus. SGX has amended its rules to effect the framework, and issued a practice note to provide guidance to issuers on the relevant procedures and processes**.
Second, under the Exempt Bond Issuer Framework, issuers that satisfy specified thresholds that are higher than the eligibility criteria under the Bond Seasoning Framework*** can offer bonds directly to retail investors at the start of an offer without a prospectus. The new regulations give effect to the policy and legislative proposals consulted on in September 2014 and December 2014 respectively on the Bond Seasoning Framework and Exempt Bond Issuer Framework.
As an additional incentive for eligible issuers under the Bond Seasoning Framework and Exempt Bond Issuer Framework, the Minister for Finance will grant a tax deduction of up to two times to qualifying retail bond issuers for issuance costs attributable to such retail bonds. The tax concession will be available for five years and will take effect today. The MAS has also issued a circular today with further details of the tax concession.
On 1 September 2014, MAS issued a consultation paper proposing changes to the regulatory regime for bond offerings to facilitate greater access by retail investors to bonds.
On 23 December 2014, MAS published its response to feedback on the consultation paper and released a second consultation paper to seek feedback on the draft regulations to effect the proposed changes to the regulatory regime.
MAS has since published its response to feedback on the second consultation paper, which also includes a summary of the eligibility criteria under the Frameworks, the conditions for the prospectus exemptions and the regulations relating to the two new frameworks.
Interested?
On 23 December 2014, MAS published its response to feedback on the consultation paper and released a second consultation paper to seek feedback on the draft regulations to effect the proposed changes to the regulatory regime.
MAS has since published its response to feedback on the second consultation paper, which also includes a summary of the eligibility criteria under the Frameworks, the conditions for the prospectus exemptions and the regulations relating to the two new frameworks.
Interested?
Download Eligibility Criteria under the Seasoning Framework and the Exempt Bond Issuer Framework (PDF)
*Wholesale bonds refer to bonds that are offered only to institutional and accredited investors or in large denominations of at least S$200,000. Such offers are exempted from prospectus requirements under sections 274 and 275 of the Securities and Futures Act (Cap 289).
**References at http://www.sgx.com/wps/portal/sgxweb/home/regulation/consult_pub/consult_papers and http://rulebook.sgx.com/.
***For example, an issuer under the Bond Seasoning Framework can satisfy the criteria relating to credit standing if it has issued, or guaranteed the issuance of, bonds listed on SGX of at least S$500 million (or its equivalent in foreign currency) over the previous five years. In comparison, the threshold under the Exempt Bond Issuer Framework is S$1 billion (or its equivalent in foreign currency).
