1. Executive summary
The purpose of this briefing is to highlight the principal requirements and key issues to be considered when considering the listing of debt securities on The International Stock Exchange (TISE or the Exchange).
The Exchange offers:
- competitive pricing: (see section entitled "Listing fees" below);
- recognised stock exchange status
- in order to benefit from the "Quoted Eurobond Exemption" and other purposes; and
- a pragmatic approach to disclosure requirements.
The Exchange commenced operations on 27 October 1998 with the intention 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.
TISE is licensed 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.
3. International recognition
TISE, or its predecessor, has since 2002 been designated by the UK Inland Revenue as a recognised exchange under Section 1005 of the Income Tax Act (2007). This designation was significant because qualifying debt securities listed on TISE are eligible for the 'Quoted Eurobond Exemption'. This allows an issuer within the UK tax net to make payments of interest on listed securities gross without deduction for tax.
- is an Affiliate Member of the International Organisation of Securities Commissions (IOSCO);
- is officially recognised by the Australian Securities Exchange; and
- is officially recognised by the German Federal Financial Supervisory Authority, BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht).
While complying with international standards for recognised stock exchanges, TISE 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 a top tier finance centre. The International Stock Exchange Authority Limited (the Authority) has developed listing rules (the Listing Rules) which place a premium on clarity and an appropriate level of corporate governance.
Unlike European stock exchanges, TISE is not bound by or subject to any European Union Directives and, as a result, is able to be considerably more flexible in its approach. TISE does not require an issuer to appoint a local paying agent in the Channel Islands and does not typically require securities to be entered into a clearing system. In certain circumstances it may also list an issuer without audited accounts. The fees levied by the Authority for listing debt securities are competitive with other Eurobond exchanges based in the European Union.
All Exchange listing and trading information can be accessed from TISE's dedicated pages via the Authority's portal and on its website at www.tisegroup.com.
4. Appointment of listing agent
In order to proceed with a debt listing a proposed issuer must appoint a listing agent to assist in relation to the listing procedure. The listing agent will be responsible for all communications and dealings with (including seeking approval of the Authority for the form and content of the Listing Document and for the preparation and filing with the Authority of the formal listing application and supporting documentation including director's declarations). In addition, a listing agent is able to apply to the Authority for derogations in the formal disclosure requirements applicable to the contents of the Listing Document.
Ogier Corporate Finance Limited (OCFL) is one of the leading listing agents in the offshore listing market and was a founder member of TISE (previously CISX) when it launched over twenty years ago.
5. TISEA's approach to listing
The Authority recognises that debt securities issued by special purpose vehicles and intra-group holding companies tend to be purchased and traded by a limited number of sophisticated, intragroup and/or institutional investors. The Authority 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) which is therefore a relatively short form document.
Disclosure requirements have been set at a level which is 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 Listing Document should disclose such information relating to the issuer and the debt securities for which a listing is sought as specified in Schedule 1. Where any such information would not be applicable or appropriate to a particular issue an application for derogation from the formal requirements may be made to the Authority. The Authority may authorise the omission of certain information from the Listing Document where it considers such information not to be applicable or is of minor importance.
Derogation may also be permitted if disclosure would be seriously detrimental to the issuer or contrary to the public interest. As a general approach, however, the Authority would normally expect a Listing Document to disclose all such information as may be necessary to enable an investor to make an informed assessment on the financial position, activities, management and prospects of an issuer and of the rights (and any liabilities) attached to the debt securities for which a listing is sought.
6. General principles for listing on TISE
The Listing Rules are designed to ensure that investors have and maintain confidence in the securities market. In particular, in relation to the issuer and the debt securities for which application for listing has been made:
- the securities are suitable for listing;
- the issuer is suitable for listing - this is also an assessment OCFL will make;
- investors are given sufficient information to enable them to make an informed assessment of the issuer and the debt securities;
- the listing of the debt securities is conducted in a fair and orderly manner;
- all holders of listed debt securities of the same class are treated fairly and equally;
- following a listing, there is sufficient disclosure of information to investors to ensure that they are kept fully informed of all factors which might affect their interests; and
- debt securities are, by their nature, usually purchased and traded only by a limited number of investors who are knowledgeable about investment matters.
The Authority encourages prospective issuers and their listing agents to contact it at an early stage to seek informal and confidential guidance as to the eligibility of a proposed listing application. However, the Authority will charge a fee of £1,500 for this service (see section entitled "Listing fees" below).
7. Conditions for listing of debt securities
The following requirements apply to listing debt securities on TISE:
Rule 5.5 (Financial information): please see Schedule 2, for TISEA's requirements in relation to accounts and possible exemptions from such requirements.
Rule 5.2.6 (Clearing and Settlement): If it is proposed that the debt securities to be listed are to be deposited in a clearing and settlement system, such settlement system must be disclosed in the Listing Document and must be acceptable to the Authority. If the securities are not to be settled through a settlement system the issuer must disclose how the securities will be settled in the Listing Document (for example, cash settlement with the issuer).
Rule 5.2.2 (Transferability): the debt securities to be listed must be freely transferable (except to the extent that any restrictions on transfer are approved by the Authority) and tradeable.
Rule 6.3 (Listing Document): the Listing Document should contain the information referred to in Listing Rule 6.4 to 6.10 (as applicable) (or an appropriate derogation from such disclosure should be obtained).
8. The listing process
8.1 Stage 1: satisfying listing conditions
An issuer seeking a listing of debt securities on TISE must satisfy all the conditions for listing, including the provision of the following documents/information (amongst other things):
- director's declarations (however there are certain circumstances where a director's declaration will not be required, for example where an individual is also a director of an entity listed on an exchange that is recognised by the Authority);
- additional background information on the issuer and the transaction including, for example, a structure chart showing the issuer, its parent, its subsidiaries (if any) the noteholder(s) and funds flow;
- the rationale for listing and who set up the structure; and
- information on the noteholder(s).
8.2 Stage 2: preparation of draft documentation
The listing agent, in conjunction with the issuer's professional advisors, will prepare drafts of the formal listing documentation for review and comment by the Authority.
The application documents include the following:
- the Listing Document;
- the listing application (Appendix IB);
- the listing agent's declaration (Appendix III);
- a non-applicability & omitted information letter;
- a formal notice;
- a copy of the document constituting the debt securities (for example, the loan note instrument);
- copies of the constitutional documents of the issuer:
- copies of the authorising resolutions approving the issuance and listing;
- copies of any document securing, guaranteeing or subordinating the securities; and
- such additional documentation as may be required by the Authority.
8.3 Stage 3: initial application
Once the application documents are in substantially agreed form and the documents and background information have been provided, the listing agent will make the initial application on behalf of the issuer. The Authority will then issue its initial listing invoice. Once the Authority has reviewed the initial application it will provide comments to the listing agent. The listing agent will then discuss the comments with the Authority and amend the documents if necessary.
Please note that the Authority will not release its comments on the initial application until its initial fee (referred to below) has been paid.
8.4 Stage 4: listing
If the Listing and Membership Committee approves the application and they have no further comments on the initial application, the listing documentation is then signed (where applicable) and filed and the debt securities are admitted to the Official List of TISE.
9. Continuing obligations
Once a listing has occurred an issuer must comply with the continuing obligations for debt listings as set out in chapter 7 of the Listing Rules. The continuing obligations are intended to ensure that all market users have simultaneous access to the same information and to maintain an orderly market in the listed debt securities.
OCFL provides an ongoing service in relation to listed issuers, providing advice and assistance in relation to the continuing obligations required under the Listing Rules.
For more information on continuing obligations, please refer to our client briefing entitled "The International Stock Exchange: Continuing Obligations Debt Securities".
10. Listing fees
TISE fees for the listing of debt securities under the Listing Rules are currently as follows:
- initial listing fee: £4,200 or £7,000 (high yield bonds or retail debt) plus £1,000 per class for a stand-alone issue;
- formal notice fee: £150; and
- annual listing fee: £1,200 per class of debt securities.
The initial and first annual listing fees referred to above are payable in advance by the issuer.
In addition, TISE also charges the following, where applicable:
- a bulk issuer fee of £1,000 where an application is made for more than one class of debt securities and a separate suite of application documents is proposed for each class;
- a partial redemption/delisting fee of £375 per class and a full delisting fee of £500 per class;
- a variable funding note facility or amortisation facility of £1,500 per class;
- a fee of £1,500 which may be charged where an issuer seeks preliminary guidance on suitability from the Authority; and
- a fee of £2,000 which may be applied for more complex applications.
Listing document disclosure requirements
The Listing Document for debt securities should contain the following information:
|5.2.6||The clearing and settlement system that the securities will be deposited in or, if the securities are not to be settled through a settlement system, disclosure as to how the securities will be settled.|
|6.4.1||The full name, registered number (where applicable), the address of the registered office of the issuer, the date and country of incorporation or other establishment of the issuer, the legislation under which the issuer was incorporated or otherwise established and the length of life of the issuer if appropriate.|
|6.4.2||Where an issuer follows a code of corporate governance or equivalent in its jurisdiction of incorporation, a statement to this effect.|
|6.4.3||The following statements (or an appropriate equivalent
statement as agreed by the Authority):
|6.4.4||The names and addresses of the issuer's Sponsor or Listing Agent, legal advisers, registrars, custodians, trustees, depository, escrow agent and any expert to whom a statement or report included in the Listing Document has been attributed in each case as appropriate.|
|6.4.5||The name and address of the current auditor and, if different, the applicable auditors who have audited the issuer's annual accounts over the last three financial years.|
|6.4.6||Where the Listing Document includes any financial information including pictures, tables or graphs, the source of these should be clearly disclosed. Where such information is reproduced from a third party source a statement that such information has been accurately reproduced and, so far as the issuer is aware, does not omit information that would render it misleading or inaccurate.|
|6.4.7||Other exchanges (if any) where admission to listing is being or will be sought and the names of the exchanges (if any) on which securities of the same class are already listed.|
|6.4.8||The LEI of the issuer (if applicable) and the ISIN for each class of security for which listing is sought (if applicable).|
|6.4.9||The estimated net proceeds of the issue and a statement as to how such proceeds are intended to be used or applied.|
|6.4.10||Information of any legal or arbitration proceedings against the issuer (including such proceedings that are threatened of which the issuer is aware) that may have or have had (covering at least the previous 12 months) a significant effect on the issuer's financial position, or an appropriate negative statement.|
|6.4.11||A statement by the directors of the issuer of any material adverse change in the financial or trading position of the issuer and its group, where applicable, since the last audited annual accounts or subsequent half-yearly reports which have been published, or an appropriate negative statement.|
|6.4.12||Details of all material interests and any potential conflicts of interest of all interested parties to the application including (i) advisers and service providers and (ii) details of agreements in place between the directors or principals of the issuer or issuer group and any parties to which the directors are related or have interest in the issuer's group.|
|6.4.13||All relevant risk warnings in respect of the issuer and the securities to be listed are to be given to potential investors to assess the risks associated with the issuer and the securities to be listed.|
|6.4.14||The date on which dealings in the securities are expected to commence.|
|6.4.15||The full name, date of appointment, business address of every director (or proposed director).|
|6.4.16||Confirmation of the financial information which will be provided to the Authority on an annual basis following listing (pursuant to Listing Rule 5.5.2).|
|6.4.17||Where an issuer has entered into transactions other than in connection with the issue of debt securities for which application is being sought and where more than nine months have elapsed since the end of the financial year to which the last published audited annual accounts relate, a half-yearly report covering at least the first six months following the end of the financial year must be included in or appended to the Listing Document. If such a half-yearly report is unaudited, that fact must be stated. Where an issuer prepares consolidated audited annual accounts, the half-yearly report must either be a consolidated statement or include a statement that, in the opinion of the issuer's directors, the half-yearly report enables investors to make an informed assessment of the results and activities of the group for the period.|
|6.4.18||Confirmation of where the documents set out in Listing Rule 5.3 are available for inspection for a reasonable period of time (not being less than 14 days) following listing of the debt securities.|
|6.4.19||The dates and parties to all contracts material to the debt
securities for which listing is sought together with either:
|6.4.20||Any profit forecast that appears in the Listing Document, must
be presented in a manner consistent with how an issuer reports its
audited annual accounts and the principal assumptions upon which it
is based shall be stated and shall:
|6.4.21||Where estimated figures or financial projections are included in the Listing Document, adequate prominent risk wording must also be included stating that such figures are estimations, cannot be guaranteed and should not be relied upon.|
|6.7||Terms and conditions of the debt securities|
|6.7.1||The amount of the issue or, if this amount is not fixed, a statement to that effect, the nature and number of the debt securities and the denomination(s).|
|6.7.2||A summary of the rights conferred upon holders of the securities.|
|6.7.3||The issue or offer price, the redemption price and the nominal interest rate and, if floating, how it is calculated and conditions for changes in the rate.|
|6.7.4||If a discount on the issue or offer price is permitted or a premium is payable, a statement describing this.|
|6.7.5||Details of the arrangements, and any legal restrictions, to the transfer of the securities including any fees payable and any other documents relating to the title or registration.|
|6.7.6||The currency of the issue. If the issue is payable in any currency other than currency of issue, this must be disclosed.|
|6.7.7||Final payment date and early repayment dates.|
|6.7.8||The prescription period for claims for payment of interest and repayment of principal.|
|6.7.9||The prescription period for claims for payment of interest and repayment of principal.|
|6.7.10||The nature and scope of the guarantees, security and commitments intended to ensure that the securities will be duly serviced.|
|6.7.11||A description of any subordination of the debt securities to other existing or anticipated debt of the issuer.|
|6.7.12||Any legislation under which the securities have been created, the governing laws and competent courts in the event of litigation.|
|6.7.13||Whether the debt securities are in registered form.|
Additional disclosure obligations are also required in relation to:
- Expert statements (Listing Rule 6.5);
- Convertible debt securities (listing Rule 6.6);
- Trading companies issues debt securities (Listing Rule 6.8);
- Asset backed securities (Listing Rule 6.9); and
- Retail debt securities (Listing Rule 6.10).
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.