Earlier this week NZX released its exposure draft of the new set of listing rules for equity, debt and funds products. The new rules are largely positive for debt listings and remove a number of common administrative delays and roadblocks, while also expanding the utility of the market.
Submissions on the exposure draft are due by 8 June 2018.
Key changes proposed for debt listings
The proposed changes for debt securities include:
- introducing a wholesale-only debt listing concept, with a minimalist approach to compliance similar to ASX's wholesale debt market. None of the usual disclosure requirements would apply to such a listing, and wholesale debt listed through this mechanism is not 'quoted'. This means there is no on-market trading, but also would conceivably allow non-NZD issuances to be wholesale listed. However, as it stands such wholesale-only listed debt would not meet the AIL zero-rating requirements. We expect this to be a key focus of attention
- removing all spread requirements for debt securities
- streamlining the process for same class debt offers by removing the need for NZX Regulation to review the terms sheets (currently 10 business days)
- increasing the maximum period between offer close and quotation to 10 business days (up from 5 business days)
- removing the need for common waivers granted to bank issuers, including allowing issuance under a deed poll, and the use of Reserve Bank disclosure statements instead of NZX's standard periodic disclosure requirements. As drafted, bank LDDs may also receive the same review exemption as same class terms sheets
- adding the building blocks for NZX to display a "green" designation for relevant debt securities. Under the proposals, NZX may require further information regarding the certification methodology green bonds, and may remove that designation if it considers it to be misleading or inaccurate.
However, there are also some changes which debt issuers will need to keep watch for, such as:
- the proposed extension of the continuous disclosure requirements (across all quoted product types) to include material information a reasonable director or senior manager ought reasonably to know
- a technical ability for NZX to require issuers to comply with the governance rules in Part 4 of the FMCA even if they are not directly subject to them
- a requirement for a debt-only listed issuer's board to include at least one director ordinarily resident in New Zealand or Australia. This may be impractical for many offshore companies and New Zealand branches, and
- a longer review period for standard PDSs. While same class terms sheets would no longer require NZX Regulation review, PDSs for regulated offers would need to be provided 20 business days in advance (double the current requirement).
We will continue to work through the exposure draft in relation to debt listings. We encourage all issuers, arrangers and other stakeholders to take this chance to submit on the rules and have your say on NZX's future path for listed debt.
NZX is on track to implement the amended rules with effect from 1 January 2019 subject to the Financial Markets Authority approval process.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.