A Listing of Debt
Content
Content of the Prospectus The Prospectus Rules govern the content of a Prospectus on the Main Market and the Listing Rules govern the content of Listing Particulars on the PSM. In practice, the PSM requirements follow the main market wholesale requirements. The presentation of financial information can be complex and is an issue that needs to be considered at an early stage. The table below summarises the key requirements for a prospectus or listing particulars:
Main Market Retail Main Market Wholesale/PSM
The PwC Capital Markets Group
The PwC Capital Markets Group comprises specialists who provide a broad range of services to companies and investment banks in connection with London capital market transactions, including: • Preparations for becoming a public company • Acting as reporting accountant on capital markets transactions • Undertaking financial and business due diligence investigations • Advising on regulatory issues • Assisting with GAAP conversion projects • Selecting the right market and advisory team The PwC Capital Markets Group is part of the PricewaterhouseCoopers global network of capital markets specialists. For more information visit www.pwc.co.uk/capitalmarkets
www.pwc.co.uk/capitalmarkets
Historical financial information
• Two years of audited financial information (or shorter period since operation incorporated) • As a minimum, the last year’s financial information must be presented on the basis to be applied in the issuer’s next annual financial statements • To be included if published since the last audited financial statements. If audited or reviewed such report to be included • Must be included (with comparatives) if more than 9 months elapsed since year end • Not required
Listing in London
Interim financial information
• Not required
Contacts Tom Troubridge +44 (0) 20 7804 4723 [email protected] Giles Hawthorne +44 (0) 20 7804 9881 [email protected] James Millar +44 (0) 20 7213 8711 [email protected]
PwC Capital markets Group comprises specialists who provide a broad range of services to companies and investment banks in connection with London capital market transactions.
Our guide to a listing of debt
• Statement on whether or not there has been any material adverse change in prospects since the last audited accounts (not required for asset backed securities) Trend information • Information on trends, uncertainties, demands, commitments or events likely to have material effect in current year Significant change • Not required
Debra Earp +44 (0) 20 7213 3188 [email protected] Richard Weaver +44 (0) 20 7804 3791 [email protected]
• Statement required for all debt securities listings • Statement of assumptions required • No auditors’ report required. Statement by the issuer that forecast has been properly prepared and basis of accounting is consistent with its accounting policies
Profit forecast information
• To be reported on by auditors
Expert’s report Incorporation by reference
• If a report is specifically prepared for the purposes of the prospectus / offering circular, then the expert will need to consent to its inclusion • Information may be incorporated by reference, if that information has been filed with the UKLA or the issuer’s EU home member state competent authority
Companies can gain a London listing through a variety of securities and routes to market. Each of these are quite different in terms of their characteristics and regulatory requirements. This series of guides provide a brief overview of the key issues and regulatory requirements that a company should consider in contemplating a listing in London.
The London Stock Exchange and coat of arms device are registered trademarks of the London Stock Exchange plc. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2010 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. Design by ep6design 1001364
Listing in London – a guide to a listing of debt
The London Stock Exchange is one of the world’s major centres for the issuing and listing of all types of debt securities. In particular, London is a renowned centre for the listing of eurobonds.
Regulation The listing of debt is governed by the Listing Rules, Disclosure Rules and Transparency Rules and Prospectus Rules. These rules provide for flexible regulatory standards aimed at both retail and professional investors and a rapid, streamlined listing process. Which market? The London Stock Exchange offers a choice between two markets for the listing of debt securities: the EU regulated Main Market and the Exchange-regulated Professional Securities Market (PSM). In choosing the most appropriate market, companies should consider the merits of each market and how they meet their overall needs. On the Main Market issuers are subject to the EU Prospectus Directive, implemented through the Prospectus Rules. Accordingly, investors can also obtain a passport to other European markets and access to international investors. Some factors to be taken into account include: • Investor needs • Listing requirements, including eligibility criteria • Ability/willingness to produce IFRS accounts • Stock exchange fundamentals: regulation, strategic focus and investor relations, liquidity and depth of capital • Corporate image Eligibility for listing There are certain minimum eligibility requirements for companies seeking a listing of debt, regardless of which market they choose: • Free transferability of debt securities, no restrictions on ability to sell securities once purchased • Minimum initial debt offering of £200,000 • All the securities of the same class must be listed • Preparation of a prospectus for a Main Market debt listing or listing particulars for the PSM
Main Market Wholesale PSM
The Main Market The EU Prospectus Directive makes a distinction between securities designed for professional or wholesale investors and those available to retail investors. The distinction is largely determined by reference to the nominal value (or face value) of a single security. There is an important difference between the financial reporting framework for retail and wholesale securities on the Main Market. Retail rules apply to all securities with a nominal value lower than the equivalent of €50,000. Wholesale rules apply to higher denominations. The Professional Securities Market (PSM) The PSM is an exchange-regulated market for professional investors and is outside the scope of the EU Prospectus Directive (PD) though certain provisions of the PD apply through the relevant Listing Rules. The PSM is designed to meet the financing needs of issuers who are looking for a sound regulatory framework but do not require a European passport as envisaged in the Prospectus Directive. The distinction between wholesale and retail markets does not apply to the PSM, which allows securities with a denomination under €50,000 to be offered to the wholesale market. In addition, financial information can be provided under any national GAAP. The PSM therefore provides an alternative for issuers who do not prepare or do not wish to prepare their financial information in accordance with IFRS or equivalent accounting standards (US GAAP, Canadian GAAP and Japanese GAAP) or who wish to offer lower denomination securities to wholesale investors. Financial reporting framework
Market Nominal value Financial information IFRS or equivalent (currently US GAAP and Japanese GAAP and others, e.g. Canadian, Korean and Chinese GAAP, are allowed until 2012) National GAAP + Narrative reconciliation to IFRS National GAAP Document
Continuing obligations and financial reporting The continuing obligations for debt issuers are broadly the same across the Main Market and PSM, other than the more flexible financial information requirements of the PSM and the need for retail issuers on the Main Market to produce information in accordance with IFRS.
Must be disclosed to the market as soon as possible Inside information Significant transactions must be disclosed to the markets as soon as possible Must be approved and published within four months of the year end for Main Market retail debt issuers and within six months for PSM and wholesale Main Market issuers Half-yearly reports are only required for retail debt listed on the Main Market and must be approved and published within two months of the period to which they relate. Half-yearly reports are not required for wholesale debt or PSM issuers
Annual report and accounts
Half-yearly reports
Main Market Retail
<€50,000
Prospectus
≥€50,000
Any
Prospectus Listing particulars
Timeline The timeline for issuing debt depends upon the type of debt being issued. For listed debt, four days are required for initial comments and review by the listing authority and two days for subsequent comments following listing application before listing becomes effective.
Main Market Retail Main Market Wholesale/PSM
The PwC Capital Markets Group
The PwC Capital Markets Group comprises specialists who provide a broad range of services to companies and investment banks in connection with London capital market transactions, including: • Preparations for becoming a public company • Acting as reporting accountant on capital markets transactions • Undertaking financial and business due diligence investigations • Advising on regulatory issues • Assisting with GAAP conversion projects • Selecting the right market and advisory team The PwC Capital Markets Group is part of the PricewaterhouseCoopers global network of capital markets specialists. For more information visit www.pwc.co.uk/capitalmarkets
www.pwc.co.uk/capitalmarkets
Historical financial information
• Two years of audited financial information (or shorter period since operation incorporated) • As a minimum, the last year’s financial information must be presented on the basis to be applied in the issuer’s next annual financial statements • To be included if published since the last audited financial statements. If audited or reviewed such report to be included • Must be included (with comparatives) if more than 9 months elapsed since year end • Not required
Listing in London
Interim financial information
• Not required
Contacts Tom Troubridge +44 (0) 20 7804 4723 [email protected] Giles Hawthorne +44 (0) 20 7804 9881 [email protected] James Millar +44 (0) 20 7213 8711 [email protected]
PwC Capital markets Group comprises specialists who provide a broad range of services to companies and investment banks in connection with London capital market transactions.
Our guide to a listing of debt
• Statement on whether or not there has been any material adverse change in prospects since the last audited accounts (not required for asset backed securities) Trend information • Information on trends, uncertainties, demands, commitments or events likely to have material effect in current year Significant change • Not required
Debra Earp +44 (0) 20 7213 3188 [email protected] Richard Weaver +44 (0) 20 7804 3791 [email protected]
• Statement required for all debt securities listings • Statement of assumptions required • No auditors’ report required. Statement by the issuer that forecast has been properly prepared and basis of accounting is consistent with its accounting policies
Profit forecast information
• To be reported on by auditors
Expert’s report Incorporation by reference
• If a report is specifically prepared for the purposes of the prospectus / offering circular, then the expert will need to consent to its inclusion • Information may be incorporated by reference, if that information has been filed with the UKLA or the issuer’s EU home member state competent authority
Companies can gain a London listing through a variety of securities and routes to market. Each of these are quite different in terms of their characteristics and regulatory requirements. This series of guides provide a brief overview of the key issues and regulatory requirements that a company should consider in contemplating a listing in London.
The London Stock Exchange and coat of arms device are registered trademarks of the London Stock Exchange plc. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2010 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. Design by ep6design 1001364
Listing in London – a guide to a listing of debt
The London Stock Exchange is one of the world’s major centres for the issuing and listing of all types of debt securities. In particular, London is a renowned centre for the listing of eurobonds.
Regulation The listing of debt is governed by the Listing Rules, Disclosure Rules and Transparency Rules and Prospectus Rules. These rules provide for flexible regulatory standards aimed at both retail and professional investors and a rapid, streamlined listing process. Which market? The London Stock Exchange offers a choice between two markets for the listing of debt securities: the EU regulated Main Market and the Exchange-regulated Professional Securities Market (PSM). In choosing the most appropriate market, companies should consider the merits of each market and how they meet their overall needs. On the Main Market issuers are subject to the EU Prospectus Directive, implemented through the Prospectus Rules. Accordingly, investors can also obtain a passport to other European markets and access to international investors. Some factors to be taken into account include: • Investor needs • Listing requirements, including eligibility criteria • Ability/willingness to produce IFRS accounts • Stock exchange fundamentals: regulation, strategic focus and investor relations, liquidity and depth of capital • Corporate image Eligibility for listing There are certain minimum eligibility requirements for companies seeking a listing of debt, regardless of which market they choose: • Free transferability of debt securities, no restrictions on ability to sell securities once purchased • Minimum initial debt offering of £200,000 • All the securities of the same class must be listed • Preparation of a prospectus for a Main Market debt listing or listing particulars for the PSM
Main Market Wholesale PSM
The Main Market The EU Prospectus Directive makes a distinction between securities designed for professional or wholesale investors and those available to retail investors. The distinction is largely determined by reference to the nominal value (or face value) of a single security. There is an important difference between the financial reporting framework for retail and wholesale securities on the Main Market. Retail rules apply to all securities with a nominal value lower than the equivalent of €50,000. Wholesale rules apply to higher denominations. The Professional Securities Market (PSM) The PSM is an exchange-regulated market for professional investors and is outside the scope of the EU Prospectus Directive (PD) though certain provisions of the PD apply through the relevant Listing Rules. The PSM is designed to meet the financing needs of issuers who are looking for a sound regulatory framework but do not require a European passport as envisaged in the Prospectus Directive. The distinction between wholesale and retail markets does not apply to the PSM, which allows securities with a denomination under €50,000 to be offered to the wholesale market. In addition, financial information can be provided under any national GAAP. The PSM therefore provides an alternative for issuers who do not prepare or do not wish to prepare their financial information in accordance with IFRS or equivalent accounting standards (US GAAP, Canadian GAAP and Japanese GAAP) or who wish to offer lower denomination securities to wholesale investors. Financial reporting framework
Market Nominal value Financial information IFRS or equivalent (currently US GAAP and Japanese GAAP and others, e.g. Canadian, Korean and Chinese GAAP, are allowed until 2012) National GAAP + Narrative reconciliation to IFRS National GAAP Document
Continuing obligations and financial reporting The continuing obligations for debt issuers are broadly the same across the Main Market and PSM, other than the more flexible financial information requirements of the PSM and the need for retail issuers on the Main Market to produce information in accordance with IFRS.
Must be disclosed to the market as soon as possible Inside information Significant transactions must be disclosed to the markets as soon as possible Must be approved and published within four months of the year end for Main Market retail debt issuers and within six months for PSM and wholesale Main Market issuers Half-yearly reports are only required for retail debt listed on the Main Market and must be approved and published within two months of the period to which they relate. Half-yearly reports are not required for wholesale debt or PSM issuers
Annual report and accounts
Half-yearly reports
Main Market Retail
<€50,000
Prospectus
≥€50,000
Any
Prospectus Listing particulars
Timeline The timeline for issuing debt depends upon the type of debt being issued. For listed debt, four days are required for initial comments and review by the listing authority and two days for subsequent comments following listing application before listing becomes effective.
