Mumbai: Market regulator Sebi Monday made it mandatory for companies seeking listing of corporate bonds and other debt instruments to maintain adequate security cover for them at all times.
The 100% security cover for listed debt instruments will have to be provided by listed as well as unlisted companies, the Sebi said while issuing the guidelines for listing agreement for debt securities.
“The issuer shall ensure ... create and maintain security ensuring 100% security cover for listed secured debt securities at all times and ensure that charges on the assets are registered,” the market regulator said.
Sebi further said that while listed companies will have to make minimal disclosure while seeking listing of debt instruments, the unlisted companies will be required to provide detailed disclosures.
Debt securities include corporate bonds, government bonds, certificate of deposits, municipal bonds and other non-convertible debt instruments.
A company whose equity is listed on stock market, the regulator said, will have to make “minimal incremental disclosures related to the debt security ... since large amount of information is already in public domain”.
The agreement has been prepared by Sebi in consultation with the National Stock Exchange and the Bombay Stock Exchange.
Sebi further said listed companies under the equity listing agreement with stock exchanges are required to disclose material developments on a continuous basis.
In case of those companies whose shares are not listed on stock markets, the market regulator said, the firms will have to provide detailed disclosures but fewer than those required under the equity listing agreement.
The regulator has already notified Sebi (Issue and Listing of debt Securities) Regulations 2008, to encourage development of primary market for corporate bonds.
The market regulator said the issuer of debt instruments will have to inform the exchange about the credit rating, asset cover available, debt-equity ratio etc in a half-yearly communication.
It will also have to notify the exchange regarding expected default in timely payment of interests or redemptions in respect of debt securities.
Securities must be allotted to the public within 30 days of the closure of the issue, the Sebi said.
In case the allotment is not made or refund orders have not been dispatched within 30 days of the closure of the issue, the issuer will have to pay an interest of 15% per annum.
In the cases, where the equity shares of the issuer are not listed on the exchanges, the issuer will “not forfeit unclaimed interest and such unclaimed interest shall be transferred to the Investor Education and Protection Fund”.