Singapore investors will find it easier to invest in corporate bonds

The Monetary Authority of Singapore (MAS) has introduced two new regulations to facilitate corporate bond offerings to retail investors - individuals who buy securities for personal investment, as opposed to a company for corporate investment.The changes are part of MAS’ overall efforts to widen the investment options available to retail investors through better access to simple investment products that are relatively less risky.

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?

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).

MAS quashes rumours that it is closing down on 28 May

A statement on the Malaysia Airlines website emphasises that it is not planning to close down on 28 May 2014, as rumoured. Articles reporting on the matter were written based on quotes from unofficial sources, the statement noted.

Malaysia Airlines’ CEO, Ahmad Jauhari Yahya said, “Despite the rumour, we maintain our commitment to remain competitive, with greater marketing push. For example, the current Malaysia Airlines Travel Fair (MATF) allows travelers to purchase our tickets at 50% off for immediate travel until 31 December 2014. We are running business as usual, and passengers should not worry.”

The airline has reported losses last year as well. The company reported a loss of RM443 million for the most recent quarter ending 31 March 2014, against a RM279 million loss for the same period a year ago. 

The Star wrote an editorial opinion about the airline here.

Malaysian Airlines retires MH370 and MH371 flight codes

A statement on the Malaysian Airlines website noted that the MH370 flight code, marking the Kuala Lumpur to Beijing route, and the corresponding MH371 code for the Beijing to Kuala Lumpur route, will be retired from 14 March 2014 as a mark of respect to the lost passengers and crew of MH370 on 8 March 2014. 

The replacement numbers are MH318 for Kuala Lumpur to Beijing, and MH319 for Beijing to Kuala Lumpur. 

According to the statement there are no changes to the frequency of the airline's services, and the double daily services to Beijing will continue. 

"Our thoughts and prayers remain with the families of our colleagues and passengers of MH 370," the statement concluded. 

As of 12 March 2014, there have been many theories and false alarms since the plane lost contact in the early hours of 8 March, but no definitive conclusions as to where the plane is, nor what has happened to it.