South Africa: JSE Debt Listings Requirements Amended

On 23 September 2016, the South African Registrar of Securities Services announced the commencement of certain amendments to the JSE Debt Listings Requirements (the "DLRs"). The bulk of the amendments took effect on 24 October 2016.

The amendments include a number of changes to various sections of the DLRs that will have an impact on the obligations of:

  • issuers (specifically special purpose vehicle issuers of asset-backed debt securities ("ABSs") and issuers of credit-linked notes)
  • guarantors (including guarantors of the obligations underlying ABSs)
  • issuers' and guarantors' auditors
  • debt sponsors

Included in the amendments are provisions that:

  • require issuers to submit to the JSE Limited ("JSE"), on an annual basis, a compliance certificate confirming that they have adhered to all of the DLRs and every disclosure requirement for continued listing on the JSE during the preceding 12-month period. A similar requirement is currently imposed on issuers with securities listed on the main board of the JSE. Issuers will be required to submit a compliance certificate, together with their annual financial statements, "where the financial year-end of the issuer is on or after 31 December 2016". Given that the market convention is generally for issuers to update their registered programmes prior to an issue of notes only, this new requirement represents a significant shift in that it appears that issuers may now have to update their programmes on an ongoing basis to account for changes in law (including changes to the DLRs) in order to be in a position to submit the compliance certificate.
  • prohibit debt sponsors from appointing executives who have been convicted of any offence under the Financial Markets Act, 2012 (this was previously limited to offences under the Companies Act, 2008, in addition to criminal offences generally).
  • make it clear that issuers will require the approval of "holders of debt securities holding not less than 66.67% ... of the value of a specific class of notes or all outstanding notes ... for changes to the terms and conditions of the debt securities" (our emphasis). This may mean (depending on the quorum requirements for noteholder meetings) that the standard provisions in most issuers' programmes that permit amendments to the terms and conditions with the approval of an "extraordinary resolution adopted at a properly-quorated noteholder meeting" may no longer comply with the DLRs.
  • impose more onerous disclosure requirements on issuers of ABSs. Issuers of ABSs will now be required to:
  1. ensure that the financial information of any underlying obligor, whose obligations are in respect of an underlying debt security with a value of 10% or more of the total value of the underlying debt securities, is made publicly available (on a website), unless the underlying obligations are guaranteed under an irrevocable, unconditional on-demand guarantee, in which case the guarantor's financial information may be made publicly available instead. It appears that this obligation may be limited to ABSs backed by other "debt securities". The above disclosure requirements will also be imposed in respect of the obligors of reference obligations (or if no reference obligations are specified, the reference entities) in respect of credit-linked notes.
  2. make periodic reports on the underlying pool of assets within set time frames (previously, this was open-ended).
  3. make use of a new reporting template with certain minimum disclosures. Reporting using the standard template will be required from 1 January 2017.
  • do away with the requirement for issuers to notify the JSE of a change to the individual auditor classified as the "designated auditor".
  • require (i) all issuers to prepare and publish annual financial statements (the proposed amendments to the DLRs published in July 2016 included a requirement that issuers prepare and publish interim financial statements, but this appears to have been excluded from the promulgated amendments); and (ii) guarantors, if required by the JSE, to also prepare and publish annual financial statements.
  • require issuers (other than municipalities, to which the old timeframes continue to apply) to submit their audited financial statements to the JSE within four, rather than six, months of the issuers' financial year-end. This requirement will commence in respect of issuers with year-ends on or after 30 September 2017.
  • require issuers, where the authorised amount of a programme or listed and issued amount of a debt security (an invitation to redeem, convert or split, for example) is to be permanently reduced, to publish an announcement on SENS at least two days prior to the reduction coming into effect (previously, this was open-ended).

Given the potential impact on various role players in the debt capital markets, these amendments should be carefully reviewed to determine their full impact.

A mark-up against the affected provisions of the previous iteration of the DLRs, the letter published by the JSE announcing the commencement date of the amendments to the DLRs, an implementation letter issued by the JSE setting out the implementation dates of the various amendments, and Service Issue 23 of the JSE Listings Requirements (to which the DLRs, as amended, are attached) can be accessed on the "Issuer Regulation" page of the JSE's website.

Board Notice 160 of 2016 can be accessed under the "Subordinate Legislation" dropdown menu on the capital markets "Documents" page on the Financial Services Board's website.

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.

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