In the last few years, an increasing number of issuers of high yield bonds have chosen The International Stock Exchange (TISE or the Exchange) as the exchange of choice in order to list high yield bonds. Whilst offering a "recognised stock exchange" by, amongst others, Her Majesty's Revenue and Customs, TISE's robust but proportionate listing rules, combined with the Exchange's pragmatic and commercial approach to listings, often appeals to issuers from the United Kingdom, Europe and the United States.
TISE provides recognised facilities for the listing and trading of debt instruments and securities issued by companies and other forms of investment vehicles. In particular, TISE has seen an increase in the listing of a number of specialist securities, such as high yield bonds which are marketed to qualified institutional investors and sophisticated investors under Rule 144A of the United States Securities Act of 1933.
European Union's Market Abuse Regulations
Since the introduction of the European Union's Market Abuse Regulation (Regulation 596/2014) (MAR) which repealed and replaced the Market Abuse Directive (2003/6/EC), a number of issuers have sought to not only list new high yield bonds on the Exchange, but also move their current listings to TISE. MAR came into effect from 3 July 2016 in an effort to establish a more uniform interpretation of the market abuse regime across the European Union (EU) as the regulations more clearly define the rules applicable in member states.
The obligations imposed by MAR are not only often seen as burdensome and costly for issuers, but also apply equally to all types of securities and are therefore disproportionately onerous for some specialist securities such as high yield bonds. Under MAR, not only are legal entities subject to fines and sanctions, but individual employees may also be liable under certain circumstances for market abuses, which now qualify as criminal offences.
Since market abuse penalties in the EU or the UK may include imprisonment, it is understandable why issuers who would have previously had their high yield bonds listed on EU markets, most notably the Luxembourg Stock Exchange and the Irish Stock Exchange, are now increasingly seeking alternatives outside of the EU, such as TISE.
As the Channel Islands are based outside of the EU, MAR does not apply to securities listed on TISE. Whilst the Exchange may not be subject to the obligations imposed by MAR, TISE still maintains robust market abuse rules which are applied proportionately to the type of securities listed and TISE remains an internationally recognised exchange by, amongst others, Her Majesty's Revenue, the German securities regulator, BaFin, and the Australian Securities Exchange and Customs.
Advantages of Listing High Yield Bonds on TISE
The key advantages to listing high yield bonds may be summarised as follows:
- TISE is a "recognised stock exchange", interest paid on qualifying high yield bonds does not have to be withheld for UK tax purposes if the high yield bonds are listed on TISE;
- as detailed above, TISE is not part of the EU, issuers issuing high yield bonds on TISE do not have to comply with MAR;
- in addition to the above, issuers issuing high yield bonds on TISE do not have to comply with the EU Prospectus Directive (2003/71/EC);
- TISE is within the same time zone as the UK and the Channel Islands are an English speaking jurisdiction;
- personalised approach with prompt turnaround time and consistency of response;
- TISE listing fees are very competitive (current fees may be found on TISE website). In addition, cost savings may arise as, under the Exchange's listing rules (the Listing Rules), existing documentation may be utilised to form part of the required listing application documentation;
- responsive and approachable;
- international standards of issuer regulations;
- enhanced marketability and added value service;
- premier locations; and
- a pragmatic and flexible approach to disclosure requirements.
Process of Listing High Yield Bonds on TISE
The first stage in the making of any application for admission to the Official List is the appointment of a listing agent. The applicant must have a listing agent at all times while making the application. Once listed, the listing agent facilitates compliance with the ongoing obligations outlined in chapter 7 of the Listing Rules, a copy of which can be found here. Appleby Securities (Channel Islands) Limited is a full listing member able to act as listing agent in respect of the listing of high yield bonds.
The listing procedure consists of four steps, each can be summarised below:
- Step 1: Satisfying Initial TISE Listing Conditions – before the draft application can be submitted to the Exchange, the listing agent will assist the issuer with the collation of certain details and documentation from the issuer in respect of the high yield bonds being listed and details of the structure of the issuing entity. The listing agent will then prepare the draft application documentation for the issuer's review and consideration;
- Step 2: Submission of Draft Application to TISE – the draft application for listing of high yield bonds can then be submitted to the Exchange by the issuer's listing agent, upon which (and subject to the settlement of the Exchange's listing application fee) the Exchange will consider the application and revert within 3 business days with its initial comments letter.
The applicant must submit certain documents to TISE as required by the Listing Rules. The documentation consists of a listing document, which can take the form of an existing published prospectus, offering memorandum, scheme particulars and the like, together with supporting documentation such as accounts, when necessary, and various standard application forms which TISE provides within its Listing Rules.
The disclosure requirements for the documentation that form the draft application to the Exchange are set out in chapter 7 of the Listing Rules. The listing agent of the issuer will advise as to compliance with the Exchange's requirements and where updated information is required, will assist with the drafting of an update "wrapper" document that forms part of the listing application documents;
- Step 3: Approval – following correspondence between the listing agent and the Exchange, once the Exchange are satisfied with the form of the application, the issuer and their listing agent submit the final application to TISE who will submit a report, including their recommendations to TISE's Listing and Membership Committee to be considered at a meeting of the Listing and Membership Committee; and
- Step 4: Listing – if the Listing and Membership Committee approves the application, the listing documentation is then filed and the high yield bonds are admitted to the Official List. Upon completion of the listing, the issuer will be required to ensure compliance with the ongoing obligations outlined in chapter 7 of the Listing Rules.
TISE also provides a facility for the secondary listing of a company's high yield bonds which are already listed on one or more other recognised stock exchanges.
The listing process is generally the same for a secondary listing as for a primary listing. TISE will, however, permit an issuer to use the previous listing document approved by the issuer's primary exchange (within the 12 months prior to the secondary listing application) to obtain a listing on TISE and certain information necessary for a primary listing may not be required to be submitted to TISE. TISE may, however, ask that additional documentation be prepared by such an issuer in the form of a wrapper document or supplementary listing document, to be annexed to the previously issued listing document approved by the issuer's exchange of primary listing, if the documents supplied prove to be inadequate.
Appleby Securities (Channel Islands) Limited
Appleby Securities (Channel Islands) Limited, wholly owned by the Appleby (Jersey) LLP, is a full listing member of TISE, and can act as a listing agent or sponsor for all listing purposes. Appleby Securities (Channel Islands) Limited is able to provide high quality, cost-effective professional services in all aspects of structuring and documenting debt and equity issues, from initial inception to public offerings and listings.
We provide a professional and integrated service, coordinating the listing process and supporting the issuer throughout its application. We also act as our client's ongoing agent and assist them in meeting the issuer's continuing obligations as a listed issuer on the exchange.
Originally published by Appleby, on June 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.