Singapore Exchange Limited (SGX) takes measures to facilitate secondary fund raising by listed issuers in a timely manner. The new arrangements will hold for a period of two years until 31 December 2010.
New steps will assist listed issuers seeking equity funding from their shareholders under the current global market environment of reduced credit availability.
The measures to be introduced are likely to include shortening 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. These measures are expected to be announced in January 2009. Allowing sub-underwriting arrangements with major shareholders subject to safeguards 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 and/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. The major shareholder may also sub-underwrite more than his entitlement for which there is an underwriting fee.
To protect the interest of other shareholders, an issuer undertaking a rights issue where a major shareholder receives a sub-underwriting fee without specific shareholder approval, must meet certain conditions including the following:- The issuer’s board provides assurance that the terms of the sub-underwriting arrangement are fair, and are not prejudicial to the issuer and to other shareholders. The board must provide the basis for their opinion;
– The issuer’s board confirms that 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
– The underwriter must be a financial institution licensed by MAS to conduct underwriting activities.
Undertaken changes ensure that Singapore listed issuers are not disadvantaged when raising funds from the secondary market. SGX listing rules already allow underwriting arrangements as described above but with specific shareholder approval. Requiring shareholder approval extends the rights issue exposure period and increases the risk and uncertainty for issuers and underwriters.
In the current market environment, it is particularly important that issuers should not be impeded from raising funds in a timely manner. The practice of sub-underwriting arrangements without shareholders’ approval is allowed in certain major jurisdictions.
L.D.