SGX to Make it Easier for Listed Firms to Raise Funds
One key measure is to shorten the period for rights issue
By Dennis Chan 20 December 2008
The Singapore Exchange (SGX) is introducing new measures to make it easier for listed companies to raise money in these difficult times.
In a statement last night, the exchange said it was taking steps to facilitate secondary fund raising by listed issuers in a timely manner, following consultation with the Monetary Authority of Singapore (MAS).
The current credit squeeze has hampered companies trying to raise capital. Among the hardest hit are Singapore real estate investment trusts, which are finding it hard to refinance debts with banks.
‘These measures will assist listed issuers seeking equity funding from their shareholders under the current global market environment of reduced credit availability,’ the SGX said.
They were introduced based on industry feedback received by the SGX and MAS.
One key measure is to shorten the period for rights issue. This is likely to include curtailing the notice period for books closure date, reducing the review time by the exchange, and accepting submission for all rights issue applications prior to announcement.
Fuller details are expected to be announced next month.
The SGX and MAS have also received feedback that in the current market environment, underwriters are unwilling to make a commitment without major shareholders’ agreement to take up their entitlement or sub-underwrite a portion of the excess rights shares. Such arrangements may involve a fee to be paid to major shareholders. By making an upfront commitment, the major shareholder foregoes his ability to trade his rights entitlement. He may also sub-underwrite more than his entitlement for which there is an underwriting fee.
To protect the interest of other shareholders, an issuer who undertakes a rights issue where a major shareholder receives a sub-underwriting fee without specific shareholder approval, must meet certain conditions.
They include requiring the issuer’s board to provide assurance that the terms are fair, and are not prejudicial to the company and to other shareholders. The board must provide the basis for its opinion.
The board will also need to confirm that terms agreed between the issuer and the underwriter, including the commission payable to the underwriter and the major shareholder, are conducted at arm’s length and under normal commercial terms.
Finally, the underwriter must be a financial institution licensed by MAS to conduct underwriting activities.
SGX listing rules already allow such underwriting arrangements, but with specific shareholder approval.
Requiring shareholder approval extends the rights issue exposure period and increases the risk and uncertainty for issuers and underwriters.
The new measures will help to ensure that Singapore-listed issuers are not disadvantaged when raising funds from the secondary market.
Furthermore, such arrangements give greater assurance of a successful fund-raising exercise.
‘In the current market environment, it is particularly important that issuers should not be impeded from raising funds in a timely manner,’ the SGX said.
It also noted that the practice of sub-underwriting arrangements without shareholders’ approval is allowed in certain major jurisdictions elsewhere.
The new arrangements will apply until Dec 31, 2010. The SGX will review their effectiveness at the end of the period.
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SGX to Make it Easier for Listed Firms to Raise Funds
One key measure is to shorten the period for rights issue
By Dennis Chan
20 December 2008
The Singapore Exchange (SGX) is introducing new measures to make it easier for listed companies to raise money in these difficult times.
In a statement last night, the exchange said it was taking steps to facilitate secondary fund raising by listed issuers in a timely manner, following consultation with the Monetary Authority of Singapore (MAS).
The current credit squeeze has hampered companies trying to raise capital. Among the hardest hit are Singapore real estate investment trusts, which are finding it hard to refinance debts with banks.
‘These measures will assist listed issuers seeking equity funding from their shareholders under the current global market environment of reduced credit availability,’ the SGX said.
They were introduced based on industry feedback received by the SGX and MAS.
One key measure is to shorten the period for rights issue. This is likely to include curtailing the notice period for books closure date, reducing the review time by the exchange, and accepting submission for all rights issue applications prior to announcement.
Fuller details are expected to be announced next month.
The SGX and MAS have also received feedback that in the current market environment, underwriters are unwilling to make a commitment without major shareholders’ agreement to take up their entitlement or sub-underwrite a portion of the excess rights shares.
Such arrangements may involve a fee to be paid to major shareholders. By making an upfront commitment, the major shareholder foregoes his ability to trade his rights entitlement. He may also sub-underwrite more than his entitlement for which there is an underwriting fee.
To protect the interest of other shareholders, an issuer who undertakes a rights issue where a major shareholder receives a sub-underwriting fee without specific shareholder approval, must meet certain conditions.
They include requiring the issuer’s board to provide assurance that the terms are fair, and are not prejudicial to the company and to other shareholders. The board must provide the basis for its opinion.
The board will also need to confirm that terms agreed between the issuer and the underwriter, including the commission payable to the underwriter and the major shareholder, are conducted at arm’s length and under normal commercial terms.
Finally, the underwriter must be a financial institution licensed by MAS to conduct underwriting activities.
SGX listing rules already allow such underwriting arrangements, but with specific shareholder approval.
Requiring shareholder approval extends the rights issue exposure period and increases the risk and uncertainty for issuers and underwriters.
The new measures will help to ensure that Singapore-listed issuers are not disadvantaged when raising funds from the secondary market.
Furthermore, such arrangements give greater assurance of a successful fund-raising exercise.
‘In the current market environment, it is particularly important that issuers should not be impeded from raising funds in a timely manner,’ the SGX said.
It also noted that the practice of sub-underwriting arrangements without shareholders’ approval is allowed in certain major jurisdictions elsewhere.
The new arrangements will apply until Dec 31, 2010. The SGX will review their effectiveness at the end of the period.
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