Ogier Corporate Finance Limited sponsored the recent listing of debt securities issued by Best Buy Distributions Ltd on the Channel Islands Stock Exchange ('CISX' or the 'Exchange'). This was the 3000th listing on the CISX. Demand for CISX listings remains strong - with over 100 new listings being undertaken by Ogier during 2008.
This briefing gives an overview of the advantages of Listing Debt Securities on the CISX.
The CISX offers:
- a fast document turnaround time (often same day);
- a pragmatic approach to disclosure requirements.
- international standards of issuer regulation; and
- competitive pricing (initial CISX listing fee of £3,300 for a standalone issue with no annual fee).
Designation by both the UK authorities and international organisations is a strong endorsement of the status of the Channel Islands as a significant financial centre.
The Exchange commenced operations on 27 October 1998 for the purpose of providing recognised facilities for the listing and trading of a broad range of debt securities. Current listings on the Exchange include equity-linked notes, convertible notes, PIK notes, Eurobonds and warrants.
The CISX is authorised to operate as an investment exchange under the Protection of Investors (Bailiwick of Guernsey) Law 1997 and is regulated and supervised by the Guernsey Financial Services Commission.
In December 2002 the CISX was designated by the UK Inland Revenue as a recognised stock exchange under Section 841 of the UK Income and Corporation Taxes Act 1988 ('ICTA'). This designation is significant because qualifying debt securities listed on the CISX are now eligible for the 'Quoted Eurobond Exemption'.
This allows an issuer within the UK tax net to make payments of interest on the listed securities gross without deduction for tax.
In designating the CISX as a recognised stock exchange under section 841 of ICTA it was necessary for the UK Inland Revenue to determine that:
- the CISX is a stock exchange undertaking the normal business of a stock exchange and is regulated as an investment exchange in a major economy, or in a significant financial centre; and
- the Channel Islands have proper and effective arrangements for financial regulation which meet internationally accepted modern standards in this area.
It is important to note that the legislation introduced by the Finance Bill 2007 in no way alters the position of the CISX as a recognised stock exchange.
The CISX has been designated by the US Securities and Exchange Commission as a Designated Offshore Securities Market under Regulation S of the US Securities Act 1933 and has also been classified as a 'designated investment exchange' by the Financial Services Authority in the UK. This classification facilitates trading by UK authorised firms by providing a more favourable regulatory environment for transactions effected on the CISX and also allows UK authorised firms to sell investments listed on the CISX to clients in the USA.
The CISX is also recognised by the Australian Stock Exchange, is registered with the International Federation of Stock Exchanges as a corresponding market and is an associate member of the International Securities Market Association. In addition, the CISX is a member of the European Securitisation Forum (an organisation sponsored by the US Bond Market Association), an affiliate member of International Organisation of Securities Commissions and an associate member of the International Capital Market Services Association.
A technical advantage that the Exchange has over other stock exchanges is that the CISX is more flexible in its accounting requirements and does not insist on the adoption of International Accounting Standards / International Financial Reporting Standards for debt securities, provided that an appropriate accounting standard is used. Under IAS / IFRS financial liability derivatives must be accounted for at 'fair value' rather than at historic cost. This can result in an issuer incurring technical losses or profits, which in turn may produce unpredictable tax liabilities.
The CISX operates in a remote environment within an electronic trading system which it monitors centrally. All CISX listing and trading information can be accessed from the CISX's dedicated pages on Reuters Triarch screen-based trading platform and on its Internet Website at www.cisx.com. Trading Members of the Exchange may display orders for listed securities by sending their prices via Reuters to the CISX and these prices are then disseminated to all Reuters users (access via CISX's Reuters pages CISXINDEX).
Unlike other European stock exchanges, the CISX is not bound by any European Union Listing Directives and, as a result, is able to be considerably more flexible in its approach. The CISX does not require an issuer to appoint a local paying agent in the Channel Islands and is generally more flexible on local presence requirements compared to stock exchanges established in the EU. The CISX is aware of the time constraints, which affect issuers and their professional advisors, and is committed to meeting an agreed transaction timetable. The fees levied by the CISX for listing debt securities are competitive with other Eurobond exchanges.
Appointment of Sponsor
In order to proceed with a listing a proposed issuer must appoint a sponsor to assist in relation to the listing procedure. The sponsor will be responsible for all communications and dealings with the Exchange (including seeking approval of the Exchange for the form and content of the Listing Document and for the preparation and filing with the Exchange of the formal listing application and supporting documentation). In addition, a sponsor is able to apply to the Exchange for derogations in the formal disclosure requirements applicable to the contents of the Listing Document.
Services Offered by Ogier Corporate Finance Limited
Ogier Corporate Finance Limited is a full listing member of the Channel Islands Stock Exchange, wholly owned by Ogier, and is able to act as a sponsor for listing purposes. It is the leading sponsor on the Channel Islands Stock Exchange. Ogier and its associate companies are experienced in the provision of high quality and cost effective professional services in relation to special purpose vehicles. We have experience in all aspects of structuring and documenting debt issuance transactions, from initial design to public offerings and listings of debt securities.
Full details of the services provided by Ogier Corporate Finance Limited are available on request.
Listing by a Special Purpose Vehicle
Many institutional investors are constrained by their internal investment policies to investing in securities which are listed on a recognised stock exchange. The CISX has been established for the purpose of providing, among other services, a recognised stock exchange listing facility for specialised debt securities. While complying with international standards for recognised stock exchanges, the Exchange has adopted a flexible and pragmatic approach to regulation. This business oriented approach is similar to that which has contributed to the development of the Channel Islands as first class finance centres. The CISX has developed listing rules which place a premium on clarity and an appropriate level of corporate governance. Fast track listing procedures have also been developed to facilitate the listing of structured debt instruments. This enables the Exchange to provide arrangers of debt issuance transactions with a fast, efficient and cost-effective listing facility.
This briefing document provides a summary of the requirements for the admission of asset-backed and other specialist debt securities issued by a special purpose vehicle to a listing on the Exchange.
(Within the meaning of the Listing Rules, a 'special purpose vehicle' is any company, unit trust or limited partnership formed for the specific purpose of issuing one or more classes or series of debt securities or assetbacked securities.)
Client Briefings on Establishing Special Purpose Vehicles and on other aspects of Channel Islands company law have been prepared by Ogier and are available on request.
The Exchange's Approach to Listing
The Exchange recognises that structured debt securities issued by special purpose vehicles tend to be purchased and traded by a limited number of sophisticated and institutional investors. The Exchange endeavours to adopt a pragmatic approach to regulation. It is flexible in its requirements regarding the detailed information describing the issuer and its debt securities required to be included in a prospectus (the 'Listing Document'). Disclosure requirements have been set at a level which are intended to provide investors with sufficient information to enable them to make an informed investment decision regarding the listed securities but without imposing unnecessarily onerous demands on an issuer.
A client briefing on the content requirements of the Listing Document and the listing process is available on request.
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.