Editor’s note: This is general educational information about a Singapore listing framework for debt securities. It is not advice, and it does not concern any particular issuer or bond. Everything below is drawn from the official rulebooks and regulations listed at the end.
Analysis: a time test where Europe uses a price test
The European Union solves the same problem by denomination rather than by delay. Regulation (EU) 2017/1129 applies alleviated treatment to non-equity securities designed for qualified investors, and it draws the line at a denomination per unit of at least EUR 100 000, which the Regulation says reflects the higher investment capacity of the investors concerned. Offers of securities whose denomination per unit is at least EUR 100 000 are outside the prospectus obligation entirely. Where non-equity securities trade only on a regulated market segment accessible to qualified investors, the Regulation’s recitals rule out resale to non-qualified buyers unless a prospectus appropriate for them is drawn up.
That is a permanent wall. Singapore’s is a door with a delay and a set of conditions on the person holding it open. The difference is worth stating plainly: the EU treats denomination as a proxy for sophistication and keeps the two markets separate; Singapore accepts that the same instrument can move between them once six months of listed trading and continuing disclosure have accumulated, provided the issuer passes its tests again at that moment.
The design tells you what the framework thinks the risk is. It is not the terms of the bond, which are unchanged by seasoning; a re-tap is defined as having the same terms except price, tenor, size and issue date. It is the quality of information available about the issuer. Six months of Rule 323 announcements, a Product Highlights Sheet and a fresh eligibility test at the crossing point are all information remedies. Nothing in Part VI touches ranking, covenants or the trust deed.
Two limits follow. The eligibility criteria that actually determine which issuers can use the framework sit in the 2016 Regulations rather than the rulebook, as does the cap on re-taps to retail buyers, so the rulebook alone cannot tell a reader how wide the door is. And the S$150 million minimum on the initial wholesale issuance restricts the framework to larger issuers before any financial test is applied. A reader assessing a seasoned bond would start with the Product Highlights Sheet and the SGXNET announcement history, because under this framework that history is the disclosure record, and there is no prospectus behind it.
What the documents say
Corporate bonds in Singapore are mostly sold to institutions, in sizes designed to keep individuals out. A framework written into the SGX Mainboard Rules in 2016 lets some of those same bonds cross over to the retail market later, without the issuer preparing a retail prospectus. The crossing is not automatic and it is not a redesign of the instrument. It is a waiting period, a set of eligibility tests measured at three separate moments, and a short disclosure document that stands in for the prospectus.
The two populations the rules divide
Chapter 3 of the Mainboard Rules governs the listing of debt securities and splits buyers in two. Specified investors are persons specified under sections 274 or 275 of the Securities and Futures Act, or their equivalents in the jurisdiction where the securities are subscribed. Non-specified investors are everyone else.
The wholesale route is built around that split. One eligibility path requires an issue with a principal amount of at least S$750,000 and at least 80% of the issue subscribed by specified investors; another simply requires the issue to be at least 80% subscribed by specified investors. Where debt securities are offered without a prospectus and primarily to specified investors, the offering memorandum need only contain what such investors would customarily expect to see.
The size gate appears again in the trustee rule. Rule 308 requires an issuer to appoint a trustee to represent holders of its listed debt securities, and the trustee must be a trust business licensee under the Trust Companies Act, a bank licensed under the Banking Act, an approved trustee under section 289 of the SFA, or a trustee licensed or regulated in an equivalent foreign jurisdiction. That requirement falls away only where an issue is, for its entire tenor, offered only to specified investors and traded in a minimum board lot size of S$200,000. A bond that will one day be sold to individuals therefore has a trustee from the start.
The separation runs into the trading rules as well. Under the SGX-ST Rules, trades in the market for wholesale corporate bonds settle on T+2 but are not eligible for clearing by The Central Depository, unlike trades in the ready market and the unit share market for other securities. Wholesale bond settlement is arranged between the parties rather than novated to a clearing house.
What seasoning is, precisely
Rule 316, added on 19 May 2016, defines the seasoning period as the 6-month period from the date of listing on the Exchange of an issue of debt securities to specified investors that satisfies the requirements of this Part. Rule 317 then provides that debt securities initially offered only to specified investors may be made available for trading on the Exchange by non-specified investors after that period.
The eligibility test is not in the rulebook. Rule 318 requires the issuer or guarantor to meet the criteria for exemption under the Securities and Futures (Offers of Investments) (Exemption for Offers of Post-Seasoning Debentures) Regulations 2016, and states that the material date for measuring the look-back periods under those criteria is fixed by the instances set out in Rule 319.
Those instances are the mechanism worth noticing. Rule 319 requires compliance at three separate points: when the initial issuance is listed, when the issuer applies for confirmation that the securities are eligible for trading by non-specified investors, and when it applies to list additional securities for offer to non-specified investors through a re-tap. An issuer that qualified at issue and has deteriorated since does not carry its eligibility forward.
Rule 320 adds four issue requirements. The initial issuance to specified investors must have a minimum principal amount of at least S$150 million or its foreign currency equivalent. The securities must be seasoned debentures as defined in the 2016 Regulations. The offer documents issued to specified investors must be announced via SGXNET. And those offer documents, together with the Product Highlights Sheet, must be announced via SGXNET immediately on receiving the Exchange’s confirmation or approval in principle, with updated or supplemental documents issued to reflect material changes to the issuer or the terms.
A re-tap, defined in Rule 316, is an additional issuance on the same terms as the original, except for price, original tenor, size and date of issuance. Rule 321 caps the aggregate principal amount of re-tap offers to non-specified investors at the amount specified in the 2016 Regulations, while placing no cap at all on re-taps to specified investors.
Warning the wholesale buyer first
The disclosure obligations run in an unusual direction. Under Rule 322 the issuer must state in bold on the front cover of the offer documents given to specified investors that it intends to make the securities available for trading by non-specified investors. Inside, it must disclose that the securities cannot be sold to non-specified investors before the end of the seasoning period, that it may offer additional securities through one or more re-taps subject to the cap in the 2016 Regulations, that it undertakes to disclose immediately any information that may have a material effect on the price or value of the securities or on an investor’s decision whether to trade them, and that it complies with the Rule 318 eligibility criteria.
The continuing obligations that follow are the substitute for a prospectus. Rule 323 requires immediate disclosure via SGXNET of anything that may materially affect price, value or a trading decision. Rule 324 requires announcements when every 5% of the total principal amount is redeemed or cancelled, of the details of interest payments, and of the appointment of a replacement trustee. Rule 325, amended on 12 February 2021, sets out when the issuer’s and any guarantor’s consolidated profit and loss account and balance sheet must be announced, with a carve-out where the debt is guaranteed by a full and unconditional guarantee and the accounts are consolidated into a listed equity issuer that announces them.
