HK Bourse Finalises Changes to Professional Debt Regime

Source: Regulation Asia Manesh Samtani, Regulation Asia 2020-08-25

The issuer net assets requirement will be raised, a minimum issuance size will be introduced, and state corporations will be required to meet issuer eligibility requirements.

The SEHK (Stock Exchange of Hong Kong) has published conclusions to its consultation on its proposals to review and enhance its listing regime for debt issues to professional investors only.

SEHK – a subsidiary of HKEX (Hong Kong Exchanges and Clearing) – received 22 responses to its December 2019 consultation which largely indicated strong support for the proposals to amend Chapter 37 of the Listing Rules. The changes – reflecting feedback from the consultation – will be effective from 1 November 2020.

The key changes include:

Raising the existing issuer’s minimum net assets requirement from HKD 100 million to HKD 1 billion, to ensure only issuers with larger asset pools can list debts
Introducing a minimum issuance size of HKD 100 million, to ensure only issuers with financial capacity and a proven track record of supporting debt issuances of significant amounts are eligible
Requiring issuers to state explicitly in the listing document the intended investor market in Hong Kong are professional investors only, to better alert retail investors that they are not the intended class of investors for Chapter 37 debts;
Requiring publication of listing documents on SEHK’s website on the listing date, to ensure access to necessary information by both licensed intermediaries and potential investors
Introducing other Rules amendments to enhance the regulatory oversight over issuers and guarantors’ in terms of their continuing obligations

The changes are largely in line with the proposals in the earlier consultation, save for SEHK’s proposal to maintain the existing eligibility exemption available for state corporations.

In light of dissenting comments and market developments (such bond defaults by mainland state corporations), the Listing Rules will require state corporations to comply with the issuer eligibility requirements.

The consultation conclusions are available here.

The SEHK has also issued additional market guidance on disclosure in listing documents for Chapter 37 Debts, and in particular, for those with ‘special features’ (e.g. perpetual vs subordinated bonds, variable vs deferred interest payment terms, extendable maturity dates, etc).

The guidance also covers the continuing obligations of issuers and guarantors with respect to Chapter 37 Debts.

“We believe that the issuance of the Guidance will promote disclosure quality and consistency in the market, as well as remind issuers of their continuing obligations under the Professional Debt Regime,” said HKEX Head of Listing Bonnie Y Chan.

The guidance is available here.

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HK Bourse Finalises Changes to Professional Debt Regime

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