SEBI amends listing agreement for debt securities

SEBI vide circular SEBI/IMD/DOF-1/BOND/Cir-5/2009 dated November 26, 2009 has amended the debt listing agreement for debt securities. Earlier in May, 2009 SEBI had issued a simplified listing agreement for debt securities (covered in this blog here). The major changes brought out by this circular (in the debt listing agreement) are as follows.

100% asset cover to be maintained for all issued debt securities

As per the amended listing agreement the issuer should maintain 100% asset cover sufficient to discharge the principal amount at all times for the debt securities issued. Earlier, only companies issuing secured debt securities were under an obligation to maintain 100% security cover as prescribed by SEBI. Now the issuer will have to maintain the prescribed asset cover at all times, even if the issued security is an unsecured debt security.

Submission of certificate on maintenance of security

SEBI has also mandated issuers to submit half yearly certificates regarding maintenance of 100% asset cover, and the time limit of submission in respect of the last half year has been aligned with the option provided for submission of annual audited results at a later date.

Statement on deviations in use of issue proceeds

A new clause has been introduced in the listing agreement whereby issuers should furnish a statement of deviations in use of issue proceeds, if any, to the stock exchange on a half yearly basis. This should also be published in the newspapers simultaneously with the half-yearly financial results. This requirement is adopted from the equity listing agreement prescribed by the SEBI. Under the equity listing agreement the issuer has to furnish this information to the stock exchange on a quarterly basis.

Deposit of 1% of issue proceeds with exchange

Another clause has been introduced which requires issuer to deposit an amount with the Exchange calculated at 1% of the amount of debt securities offered for subscription to the public, as a condition precedent for issuance of debt securities. This requirement is also adopted from the equity listing agreement prescribed by the SEBI.

A copy of the circular is available here.