The purpose of this memorandum is to provide information on the process for listing payment in kind notes ("PIK Notes"), also known as funding bonds, on The International Stock Exchange Authority Limited (the "TISEA"). This memorandum is also relevant to the listing of further principal loan notes which are fully fungible with the existing loan notes (ie they form a single series/the same class as the existing loan notes) if the issue of such securities was pre-empted during the initial listing application stage.

Walkers Capital Markets Limited ("WCML") is a Category 1, 2 and 3 sponsor of TISEA, which means that we are able to act as a sponsor for all listing purposes, enabling all clients to achieve their goals. We are experienced in the provision of high quality and cost effective professional legal and listing services.

PIK Notes may be issued to satisfy interest payments. In these circumstances the PIK Notes are simply loan notes, usually in the same form as the existing loan notes, which are issued to the existing Noteholders for an amount equal to the amount of accrued interest.

Subject to a number of exceptions, a UK tax paying company is obliged to withhold tax from payments of interest. As TISEA has been designated as a recognised stock exchange under section 841 of the Income and Corporation Taxes Act, 1988 and section 1005 (1) of the Income Tax Act (2007), qualifying debt securities listed on TISEA are eligible for the Quoted Eurobond Exemption which allows an issuer liable to pay UK tax to make payments of interest on the listed securities gross, without deduction of withholding tax.

Listing PIK Notes

Listing of PIK Notes on TISEA under their abridged procedure is straightforward. Please note that for such procedure to apply, the original application for listing needs to include sufficient headroom for further PIK Notes to be issued from time to time. The original application should be made to list "an unlimited number of PIK Notes" or alternatively an "up to" number so as to ensure that this is the case.

Each time PIK Notes are to be issued by way of satisfaction of an interest payment, notification should be given to WCML who will then notify TISEA. Whilst we would normally expect to hear from our issuers well in advance of any further issue, the notification to WCML must be provided as soon as possible, and, at the very latest, on the day of issue. TISEA then posts an announcement on its website regarding the further issue and records the new total quantum of PIK Notes in issue. In order for the new tranche to be listed on its issue date, TISEA must receive the notification and relevant supporting documents by 12.00 noon (for listing at 18.00 on the same day).

An example notification to WCML is set out below.

Notice of new issue

"Please be advised that we issued the following notes on [Date]. Please can you arrange for these additional notes to be listed on TISEA as soon as possible.

Additional Notes:

[Number of PIK Notes] additional notes have been issued to [Investor Name A].

[Number of PIK Notes] additional notes have been issued to [Investor Name B].

Total additional notes issued [Number of PIK Notes]".

Additional documentation to be filed

The following documentation is required to support an application for the listing of PIK Notes (in PDF format):

  1. certified true copy of the issuer's board meeting minutes resolving the further issuance;
  2. certified copy of the new note certificate (if available); and
  3. any other documentation as may be requested by TISEA.

The issuer's board meeting minutes should refer to the listing of the further notes on TISEA and include the full name of TISEA (The International Stock Exchange Authority Limited). Hard copies of the documents are not required.

TISEA's fee for such a pre-empted listing application is currently £375 per issue of additional PIK Notes.

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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.