Published January 13, 2009

SGX eases measures for rights issues

New rules help firms raise funds amid credit squeeze

By LYNETTE KHOO

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FROM today, listed companies can tap new measures rolled out by the Singapore Exchange (SGX) to expedite their rights issues.

Flexible but vigilant: SGX reminds issuers to 'be mindful of their continuing disclosure obligations'

The measures, which come amid a global credit squeeze, follow an announcement by SGX last month of impending moves to facilitate secondary fund raising by listed issuers in a timely manner.

To reduce the exposure period for rights issues, SGX will now accept confidential submissions for all rights issue applications prior to an announcement. Previously, confidential submissions to SGX are only allowed for underwritten rights issues.

The notice of books closure date is also shortened from 10 market days to five market days and a checklist has been introduced to facilitate compliance by issuers and underwriters with provisions governing rights issues.

Issuers do not need to seek shareholders' approval to make such arrangements, thus reducing the exposure period and risk.

But SGX reminds issuers to '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'.

Under the new measures, SGX is also allowing underwriters to make sub-underwriting arrangements with major shareholders.

The SGX and the Monetary Authority of Singapore (MAS) have received feedback that given current market conditions, 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. By making an upfront commitment, the major shareholder foregoes his ability to trade his rights entitlement.

To protect the interests of other shareholders, SGX has earlier said that 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 certain conditions to ensure that terms are fair and conducted at arm's length under normal commercial terms. To enhance transparency, new safeguards are introduced, including the need to announce fees earned by the underwriters and sub-underwriters.

The new arrangements for sub-underwriting will hold for two years until Dec 31, 2010. SGX will then review their effectiveness.

SGX said that it will also work with issuers and their advisers with a view to introducing accelerated rights issue structures comprising an accelerated wholesale tranche and a retail tranche that follows the traditional rights issue timetable.

The move follows proposals from market participants for non-traditional rights issues through an accelerated wholesale tranche.

But due consideration will be given to protecting the interests of the retail tranche on possible differential pricing, SGX added.