Traditionally, corporate issuers look to the wholesale bond market to meet their funding needs due to the higher costs involved dealing with the retail market.
From 19 May, however, they will be able to issue plain-vanilla bonds through two new frameworks.
Seasoned offering
Under the Bond Seasoning Framework, wholesale bonds that meet eligibility criteria stipulated by the Singapore Exchange (SGX) can be offered to retail investors after the bonds have been listed on SGX for six months.
SGX currently lists 1,900 wholesale bonds which are only available in large denominations of at least S$200,000 (£99,193, $144,847, €129,175), and/or offered to institutions or accredited investors.
These ‘seasoned’ bonds can be re-denominated into smaller lot sizes, as low as S$1,000, and offered to retail investors on the secondary market.
Eligible issuers can also offer additional bonds to retail investors on the same terms as the ‘seasoned’ bonds without a prospectus.
Higher criteria
Under the Exempt Bond Issuer Framework, issuers that satisfy specified thresholds that are higher than the eligibility criteria under the Bond Seasoning Framework can offer bonds directly to retail investors at the start of an offer without a prospectus.
Wider options
The changes form part of MAS’ overall efforts to widen the investment options available to retail investors through better access to simple investment products that are relatively less risky.
As an additional incentive for eligible issuers under the Bond Seasoning Framework and Exempt Bond Issuer Framework, Singapore’s minister for finance will grant a tax deduction of up to two times to qualifying retail bond issuers for issuance costs attributable to such retail bonds.
The tax concession will be available for five years and will take effect from 19 May 2016.
Loh Boon Chye, chief executive of SGX said: “Retail investors are greatly interested in fixed income investments. The frameworks will widen the range of fixed income products and enable retail investors to access some of the 1,900 wholesale bonds listed on SGX, Asia’s leading bond-listing platform. Issuers too will gain from a bigger pool of investors.”
