By Andrew Lind of Gadens Lawyers, Sydney
ASIC is making it easier for listed companies to issue listed corporate bonds. ASIC's stated intention is to reduce the time and expense involved in making corporate bonds available to retail investors.
ASIC Class Order 10/321 allows offers of "vanilla bonds" to be made under a simplified prospectus.
Vanilla bonds can be offered under:
- a simplified prospectus with a similar level of content to a transaction-specific prospectus; or
- to allow bonds to be issued in a number of tranches, a two part prospectus comprising:
- a base prospectus that can be used for a number of offers (2 year life); and
- a second part prospectus that would relate to a particular offer (13 month life.
To issue vanilla bonds, certain conditions must be met. The conditions relate to:
The issuer - conditions include:
- the issuer must be listed and entitled to issue a transaction-specific prospectus (although ASIC will consider relief for a wholly owned special purpose finance vehicle);
- the issuer must not have been suspended from trading for more than 5 days in the last 12 months;
- the auditor's report on the issuer's most recent financial statements must be unmodified.
The bonds - the bonds must:
- be quoted on issue;
- be for an aggregate size of at least $50m (to make it more likely that there will be liquidity and that there will be some institutional participation to assist with pricing);
- be denominated in Australian dollars;
- have a fixed term of no more than 10 years (with limited ability for early redemption);
- have a fixed rate or variable market rate plus a fixed margin;
- rank at least equally with unsecured creditors;
- not be convertible into other securities;
- be issued to all investors at the same price;
- be governed by a trust deed requiring the issuer to provide ongoing disclosure to bondholders.
Prospectus disclosure - prospectus disclosure includes:
- certain prescribed statements;
- key features of the offer;
- information about significant risks;
- brief details of the business of the issuer;
- a description of the financial position of the issuer relevant to the bond issue;
- financial disclosures; and
- any other information that would need to be included in a transaction-specific prospectus.
Ongoing disclosure - issuers must meet ongoing disclosure requirements including:
- publishing on its website half year and annual updates of the key financial disclosures and quarterly reports provided to ASIC and the trustees; and
- giving investors the option of receiving email notification when documents are published on its website.
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Andrew Lind |
t +61 2 9931 4816 |
