Eurobonds listed on the Cayman Islands Stock Exchange (the "CSX") now benefit from the quoted Eurobond exemption for withholding tax purposes. This means that the CSX can now compete with stock exchanges such as Luxembourg and London.
In common with the other stock exchanges, the principal concern of the CSX is to ensure that there is adequate disclosure appropriate to the nature of the bonds being listed and the potential investors. The more sophisticated the potential investors, the more flexible the CSX may be in applying the listing rules.
This note is a summary of the rules applying to a listing of Eurobonds under Chapter 12 of the CSX's Listing Rules. Slightly different rules will apply to secured bonds which will be listed as specialist debt securities under Chapter 8. Copies of the CSX listing rules can be obtained from the CSX website: www.csx.com.ky.
It is recognised that this guide will not completely answer detailed questions which clients and their advisers may have. It is intended to provide a sketch of the subject matter covered. This guide is therefore designed as a starting point for a more detailed and comprehensive discussion of the issues. Particular circumstances or transactions should be the subject of specific legal advice given on the relevant facts at the relevant time.
A practical point to note here is that a higher denomination for the bonds to be issued may assist in demonstrating to the CSX the sophistication of investors.
The CSX will guarantee turn-around times for documents. Generally this is five days for a first review, which generally means that a CSX listing can be accommodated within a fairly tight time-frame.
The listing fees for a listing on the CSX are at least competitive with those charged by other stock exchanges. For a one-off issuance these are a US$2,500 initial fee and a US$2,500 annual fee. The CSX offers a 10 per cent discount on the annual fee if the annual fees for the term of the bonds are paid up-front.
- Where the Issuer has been incorporated for less than the usual two year period for which audited financial statements are required, the CSX may be willing to accept financial statements for a shorter period.
- The CSX is flexible in relation to the accounting standards to which the Issuer's accounts can be prepared ie no need for IFRS.
- The requirement to have audited accounts (both at the time of listing and on a continuing basis) may be waived where:
- the Issuer is either a subsidiary of a listed company or a company which (in the CSX's opinion) is suitable for listing, in each case where the Issuer's financial statements are consolidated in such company's accounts; or
- the bonds are guaranteed by another company. The sole proviso here is that the Issuer must confirm to the CSX that non-publication of the financial information would not be likely to mislead investors.
- It may also not be necessary to include certain financial information on the Issuer (eg profit and loss statements etc) in the listing document where the circumstances referred to in paragraph 3 above apply.
The CSX will consider permitting restrictions on transfer in appropriate circumstances.
Clearing and settlement
The CSX will be willing to consider alternatives to clearing through Euroclear/Clearstream/DTC in appropriate circumstances (for example, where there will be a small number of investors who will be likely to hold to term) provided that appropriate alternative arrangements are put in place and appropriately disclosed. This may include the Issuer itself maintaining a register and has obvious cost advantages.
The CSX will accept paying agents from jurisdictions other than the Cayman Islands. The CSX may also be willing to consider having the Issuer act as paying agent in appropriate circumstances, which again has obvious cost benefits.
Incorporation by reference
The CSX will generally be willing to allow incorporation by reference where the information being incorporated is publicly available from other sources.
Where Eurobonds are issued under a programme, the CSX listing of the programme is only required to be updated every five years.
The continuing obligations are relatively light. Other than publishing annual accounts (assuming that no waiver is available as discussed at paragraph 3 above) the principal requirement is to notify the CSX of certain changes affecting the Issuer (for example, changes in the nature of the Issuer's business, the Issuer's directors, the Issuer's auditors) or the Eurobonds (for example, any change in rights, and repurchases etc). There is also a general obligation to notify the CSX of any new developments which are not public knowledge and which may reasonably be expected to affect materially the market activity in and the price of the bonds or the ability of the Issuer to meet its commitments.
The CSX may grant a waiver from the requirement to disclose any matter which would otherwise be required under the listing rules where disclosure of such matter would be unduly detrimental to the Issuer.
No listing agent
There is no requirement to appoint a formal listing agent in the Cayman Islands, although for practical purposes it may be helpful to instruct Cayman Islands counsel who have familiarity with the Listing Rules to review the documentation and to liaise with the CSX.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.