Singapore Exchange Limited (“SGX”), in consultation with the Monetary Authority of Singapore (MAS), today introduces new measures to provide listed issuers greater flexibility in raising funds through the rights issue framework. Today’s measures are a follow-up to the first equity fund raising announcement issued on 19 December 2008.
The new measures, that will be effective immediately on 13 January 2009, include the following :-
A) | Reducing Exposure Period |
The increased sensitivity to credit and price risks requires issuers and underwriters to minimise their risk exposure as much as possible. In response, SGX seeks to shorten the market exposure period for rights issue by:- (i) Accepting confidential submissions for all rights issue applications prior to announcement (currently confidential submission to the SGX is only allowed for underwritten rights issue); (ii) Shortening the notice of books closure date (“BCD”) from the current 10 market days to 5 market days; (iii) Introducing a checklist to facilitate compliance by issuers and underwriters with provisions governing rights issue. Issuers should be mindful of their continuing disclosure obligations and immediately announce their rights issues if there appears to be a leakage of price sensitive information during the confidential submission period. For operational efficiency, issuers should use the BCD announcement template when providing the BCD notice. |
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B) | Allowing sub-underwriting arrangements with major shareholders |
SGX and MAS have received feedback that in the current market environment, underwriters are unwilling to make a commitment without major shareholders’ agreement to take up their entitlement and/or sub-underwrite a portion of the excess rights shares. By making an upfront commitment, the shareholder foregoes his ability to trade his rights entitlement. As announced on 19 December 2008, in order to protect the interest of other shareholders, major shareholders will only be allowed to receive sub-underwriting fees to take up their rights entitlement and/or sub-underwrite a portion of the excess rights shares subject to the following general conditions:- (i) The issuer’s Board of Directors (“Board”) provides assurance that the terms of the sub-underwriting arrangement are fair, and not prejudicial to the issuer and to other shareholders. The Board must provide the basis for their opinion; (ii) The issuer’s Board confirms that the terms agreed between the issuer and the underwriter (including the commission payable to the underwriter and the major shareholder) are on arms’ length and normal commercial terms; and (iii) The underwriter must be a financial institution licensed by MAS to conduct underwriting activities. To enhance transparency and accountability, the Exchange requires issuers and underwriters to meet additional conditions as follows:- (a) The Board’s opinion (including the basis thereof) and the confirmation referred to in paragraphs (i) and (ii) above, together with a statement whether there are any dissenting views of the Board members (and, if so, details of the dissenting views), must be announced on SGXNet; (b) The underwriters confirm to the Board that (A) the discussion on the subunderwriting arrangement with the sub-underwriters was initiated by the underwriters and not by the sub-underwriters; and (B) the underwriters will not underwrite the rights issue unless the sub-underwriters enter into the subunderwriting arrangement; (c) The commission that the sub-underwriters earn shall not be higher than, and must be part of, the commission paid to the underwriters; and (d) The fee earned by the underwriters and the sub-underwriters must be announced on SGXNet. The new arrangements for sub-underwriting will hold for a period of two years until 31 December 2010. The effectiveness of the measure will be reviewed at the end of the period. |
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C) | Accelerated Rights Issue |
SGX has received proposals from market participants for non traditional rights issue through an accelerated wholesale tranche. The proposed issue structureentails two tranches: (i) an accelerated wholesale tranche; and (ii) a retail tranche that follows the traditional rights issue timetable. The benefits of implementing an accelerated rights structure include:- (i) Ability to obtain funds from the wholesale tranche more quickly, while offering all shareholders the opportunity to participate in the rights offer; (ii) The shorter wholesale tranche reduces market risk exposure to issuers and underwriters; and (iii) The bulk of the funds to be raised can be assured within the first few days of the rights offer period. There are issues to be resolved prior to the implementation of the non-traditional accelerated rights issue. They include: (i) ability of issuers to properly identify and segregate between wholesale and retail investors; (ii) possible differential pricing between wholesale and retail tranche; (iii) inadequate time for wholesale investors to get their funding in place to subscribe for the rights issue under the accelerated wholesale tranche: and (iv) risks associated with leakage of confidential information. SGX will work with issuers and their advisers to resolve these issues with a view to introducing accelerated rights issue structures. The Exchange’s preliminary view is that one way to segregate shareholders will be to include substantial shareholders, under the wholesale tranche and non-substantial shareholders under the retail tranche. On possible differential pricing, due consideration will be given to protecting the interests of the retail tranche. |
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D) | Other Matters |
(i) Non-renounceable Rights Issue There have been proposals for SGX to allow non-renounceable rights issue. The Exchange wishes to clarify that non-renounceable rights can be undertaken by issuers with shareholder approval, via a specific mandate at a general meeting. The mandate should set out the maximum discount at which non-renounceable rights issue can be undertaken. Shareholders, as owners of the companies, can vote against such mandate if they are concerned with the potential dilutive effect, should they not wish to take up their rights entitlements. Issuers, who have not obtained a specific mandate from shareholders for the issuance of non-renounceable rights shares, can undertake non-renounceable rights issues only if the rights shares are priced at not more than 10% discount to the prevailing market price. This arrangement will also hold for a period of two years until 31 December 2010. The effectiveness of the measure will be reviewed at the end of the period. (ii) Price Stabilisation The Securities and Futures (Market Conduct) (Exemptions) 2006 allows price stabilisation actions to be undertaken for right issues with offer size of at least S$25m. The price stabilisation action can be conducted for a period of 30 days from the date of commencement of trading of the rights issue shares offered and is limited to 20% of the rights issue size. Issuers can factor this into their fund raising arrangements. (iii) Disclosure of Material Information Issuers are reminded of their continuous listing obligations under the SGX Listing Manual as well as the Securities and Futures Act to disclose all material information on a timely basis. If issuers are aware of any developments to indicate that financial performance will not match earlier estimates/projectionsor their financial position may be adversely impacted, they should promptlyannounce such information to the market. |
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Ongoing efforts to address market needs | |
SGX will continually engage market participants to enhance the attractiveness of our marketplace. |