Frequently Asked Questions (FAQ)

 

Operational details of the capital market measures
announced in the Second Stimulus Package on 10 March 2009

 

Date of issue: 16 March 2009

 

A. Proposed Revision to Terms and Conditions of Bonds and Sukuk

1. What are the types of revision applications that require notification to the SC?
 

The types of revision applications that require notification to the SC relate to the principal terms and conditions of bonds and sukuk which have been approved by the SC pursuant to section 212 of the Capital Markets & Services Act 2007 (CMSA) and issued in the market.

Applications to increase the size of bonds and sukuk do not qualify for this exemption, and the SC’s approval is still required.

   
2. Would similar flexibilities be accorded for applications to revise the principal terms and conditions of bonds and sukuk that have been approved by the SC but not yet issued?
 

No. The SC’s prior approval is still required for proposals to revise the principal terms and conditions of bonds and sukuk which have been approved by the SC but not yet issued in the market.

However, changes to the principal terms and conditions to provide for the listing of the bonds and sukuk on Bursa Malaysia need only be notified to the SC notwithstanding that these bonds and sukuk have not been issued.

   
3. Are there any prerequisites that have to be complied with before the adviser can notify the SC of such changes?
 

Notifications to the SC can only be made by the principal adviser upon compliance with the following requirements:

(a) Consent from bond / sukuk holders, trustee, credit rating agency, other regulatory authorities and other relevant parties, where applicable, has been obtained;
(b) Due process is to be observed in obtaining bond / sukuk holders’ approval for the proposed revision. This would include the requirement for related and interested parties to abstain from voting;
(c) All material information pertinent to the revision, including the impact on credit rating and the Shariah Adviser’s opinion on the proposed revision, have been communicated and disclosed to bond / sukuk holders;
(d) For revisions to sukuk issue, the Shariah Adviser’s advice on the proposed revision and opinion on whether or not such revision complies with the principles of Shariah (in this regard, pre-consultation with the SC for clarification concerning Shariah matters is highly encouraged); and
(e) Two separate announcements to be made on the Fully Automated System For Issuing/Tendering (FAST) – one on the proposed revision (to be announced on FAST prior to obtaining the approval of bond / sukuk holders) and another on the outcome of the bond / sukuk holders’ decision (to be announced on FAST immediately after the bond / sukuk holders have decided on the proposed revision). The announcement made on FAST on the proposed revision must be copied to the SC within the same day of the announcement. Announcements on FAST will not be applicable to bonds / sukuk (including loan stocks) that are listed and traded on Bursa Malaysia.
   
4. What information should be included in the notification to the SC on the proposed revisions?
 

Principal advisers must include the following documents and information in their notification to the SC:

(a) A letter notifying the SC of the proposed changes, accompanied by a confirmation that the requirements (as set out in item 3 of this FAQ) have been duly complied with by the issuer. Also, the name and telephone number of the contact person are to be disclosed in the letter should the SC require further clarification on the proposed revision;
(b) A marked-up version copy of the revised principal terms and conditions and, where applicable, the supplemental information memorandum, supplemental offering circular, executed supplemental trust deed and other issue documents;
(c) Any other material information in relation to the revision;
(d) A copy of the written consent from the relevant parties and the relevant announcement(s) in relation to the proposed revision; and
(e) A soft copy (in ‘PDF’ format and clean version) of the following documents to be e-mailed to [email protected]:
  (i)

Revised principal terms and conditions in the following format:

  • Font : Arial
  • Font size : 11
  • Margins (top, down, right, left) : 1.25”
  • Spacing : single
  (ii) Where applicable, the supplemental information memorandum, supplemental offering circular, executed supplemental trust deed and other issue documents.
   
5. Now that proposals to revise existing principal terms and conditions of bonds and sukuk need only be notified to the SC, would the SC’s fee and charges of RM2,000 still apply?
  No. In submitting the notification to the SC of the proposed changes, the fees and charges relating to applications for the revision of terms as provided for in the SC’s fee schedule will no longer apply.
   
6. Would the notification to the SC also cover proposals involving the extension to the tenure of bonds and sukuk programme/facility?
 

Yes, proposals involving the revision to the tenure of the programme/facility of bonds and sukuk need only be notified to the SC, provided that the prerequisites (as set out in item 3 of this FAQ) are met.

However, for programmes which involve the issuance of commercial papers or a combination of medium-term notes and commercial papers, the tenure of such programmes must not exceed seven (7) years from the date of first issue under the programme as required under the SC’s Guidelines on the Offering of Private Debt Securities and Guidelines on the Offering of Islamic Securities.

   
7. Revisions to the terms and conditions of bonds and sukuk for purposes of their listing on Bursa Malaysia no longer require the SC’s prior approval. Can the SC elaborate further on this?
 

Bursa Malaysia Securities Berhad had, in December 2008, announced the framework to facilitate the listing of sukuk in support of the initiatives of the Malaysia International Islamic Financial Centre (MIFC) to position Malaysia as the leading market for the issue and distribution of sukuk. In this regard, the listing of sukuk and bonds on Bursa Malaysia is provided in Bursa Malaysia’s Listing Requirements.

Essentially, the listing framework allows issuers to list their sukuk and bonds without them being quoted and traded on Bursa Malaysia. In this regard, such sukuk and bonds would still be issued through FAST and transacted under the Real Time Electronic Transfer of Funds and Securities (RENTAS) system.

To facilitate the listing of bonds and sukuk on Bursa Malaysia, any proposals to revise existing terms and conditions of bonds and sukuk for the purposes of their listing would only need to be notified to the SC, irrespective of whether the bonds and sukuk have been issued or not.

   
8. How would the new measures relating to the proposed revision to the terms and conditions of bonds and sukuk benefit the issuer?
 

Following the introduction of these new measures by the SC, the issuer would no longer need to prepare applications for revision to terms for SC’s approval. This in turn would generate time saving to the issuer as well as the time taken to obtain SC’s approval, which on average would take between 5 and 14 working days to obtain upon submission of complete information.

Further, the issuer would also save in terms of cost of submission to SC, which would involve, amongst others, the cost of engaging the relevant advisers in preparing the submission for SC’s approval and also in terms of time needed to prepare the relevant documents for the purpose of the submission.

   
9 When will the new measures relating to the proposed revision to the terms and conditions of bonds and sukuk come into force?
  These measures will take effect on 16 March 2009.

B. Removal of Mandatory Credit Rating Requirement for Convertible and Exchangeable Bonds and Sukuk

10. What type of convertible and exchangeable bonds and sukuk would qualify for the rating exemption?
 

The rating exemption is extended to convertible bonds/sukuk (or loan stocks) and exchangeable bonds/sukuk which meet the following requirements:

(a) Where investors of the bonds/sukuk or loan stocks are given the right to convert or exchange the bonds/sukuk or loan stocks into the underlying shares during the tenure of such issue; and
(b) The underlying shares are listed on any securities exchange.
   
11. Would the rating exemption be extended to issues of redeemable convertible loan stocks?
  Yes, issues of redeemable convertible loan stocks will stand to benefit from such exemption as well.
   
12 Would such exemption apply to existing issues of convertible and exchangeable bonds and sukuk that are currently rated?
  Issuers of existing convertible and exchangeable bonds/sukuk and loan stocks may opt to remove the rating of such issues, provided that the bond/sukuk/loan stock holders have consented to the removal of the rating.
   
13. How would the new measures relating to the removal of the mandatory credit rating requirement for convertible and exchangeable bonds and sukuk benefit the issuer?
  The introduction of this exemption would generate cost savings to the issuer, in particular, the cost of engaging a rating agency. It would also reduce the time to market as the rating exercise would typically require several weeks. Nevertheless, the decision on whether or not such issues need to be rated rests with the issuer.
   
14. Will the removal of the mandatory credit rating requirement for convertible and exchangeable bonds and sukuk affect investors’ interest?
 

The removal of the mandatory credit rating requirement recognises that the repayment features of such instruments include the conversion into underlying shares.

The new measure removes the mandatory requirement for convertible and exchangeable bonds and sukuk to be rated. Investors still have the right to request issuers to undertake credit ratings for the instruments.

   
15. When would the new measures relating to the removal of the mandatory credit rating requirement for convertible and exchangeable bonds and sukuk come into force?
  The new measures will take effect on 16 March 2009.
   
16. What are the transitional arrangements for Proposed Revisions which have been submitted to SC but have not yet been granted the SC’s approval on or before 16 March 2009?
  If an application for the Proposed Revision has been submitted to the SC on or before 16 March 2009, such application will continue to be evaluated by the SC and, in this regard, the proposed revision can only be carried out by the issuer once approval from the SC has been obtained.

C. Exemption from Having to Obtain the SC’s Prior Approval for Rights Issues and Issuance/Offering of Equity Securities by Unlisted Public Companies

17. What are the benefits arising from these exemptions?
 

These exemptions would facilitate secondary equity fund-raisings and corporate activities in terms of shortening the time-to-market. This is because there would no longer be a need for the preparation of documents undertaken by the issuers for submission to the SC, which may normally take about 1 to 2 months, and the SC’s approval process (i.e. up to 5 or 21 working days for rights issues and proposals by unlisted public companies respectively based on the time charter).

The exemption for rights issues would reduce the overall time-line for the implementation/ completion of the exercise to about 9 weeks (from about 14 weeks currently), inclusive of issuing the abridged prospectus and getting shareholders approval.

In addition, there will be a reduction in the costs of undertaking the rights issues. As an example, there would no longer be fees payable to the SC (for rights issue, the fee is RM15,000 + 0.05% of the nominal value of the shares issued).

   
18. If the rights issue proposal is part of a listing exercise, would the proposal require the SC’s approval?
  The SC’s approval will still be required for a rights issue proposal which forms part of an initial public offering (IPO), reverse take-over (RTO) or where the proceeds are being utilised for an acquisition which results in a significant change in the business direction of a listed corporation. However, for a composite proposal which is not part of the above, the rights issue portion would not require the SC’s approval.
   
19. Would the proposed exemption of rights issue from the SC’s approval compromise investors’ interest?
 

The exemption is given as rights issues are issued on a pro-rata basis where all shareholders are treated equally and given an opportunity to participate in the exercise. Existing shareholders who have been with the company are also assumed to have the relevant background knowledge of the company and, therefore, should be better informed and be in a position to exercise their rights.

The exemption will not compromise investor protection as the rights issue would still require the approval of shareholders where they could vote against the exercise if it is not to the benefit of the company. In addition, the SC will continue to register prospectuses for rights issues to maintain standards of disclosure and be in a position to take action against non-compliance of disclosures.

   
20. If the rights issue proposal has been announced by the company prior to the announcement of this exemption, would the company be eligible for the said exemption?
  The exemption will take effect following the gazette of a Ministerial Order. Thereafter, all rights issue proposals would be eligible for the said exemption. These however exclude proposals which form part of an IPO, RTO, or where the proceeds are being utilised for an acquisition which results in a significant change in the business direction of a listed corporation.
   
21.

Are there any corporate proposals by unlisted public companies which would not be eligible for the exemption?

  Structured warrants issued by unlisted public companies and proposals by foreign unlisted public companies would not be eligible for the said exemptions (unless already exempted under section 213 of the CMSA).
   
22. When would the exemption come into force?
  The exemption will come into force following the gazette of a Ministerial Order, which will be communicated at a later date.

D. Disapplication of the Malaysian Code of Take-overs and Mergers 1998 to private companies

23. What is the rationale of the disapplication of the take-over requirements to private companies?
  In line with international practices, the disapplication will provide greater agility for private companies to expand or restructure their businesses more efficiently.
   
24. Would the control of a public company through an acquisition of control of a private company be subjected to the Code?
  Yes. The control of the public company through the above means will be subjected to the provisions of the Code even after the disapplication of the Code to private companies.
   
25. When will the disapplication come into force?
  The disapplication of the take-over requirements to private companies will be gazetted, and communicated at a later date.

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