Adequate disclosures required for 'death spiral' convertibles: SGX

Singapore

COMPANIES that plan to issue "death spiral" convertible bonds must adequately inform shareholders about the risks, and directors must give a fiduciary opinion on a proposed deal, Singapore Exchange (SGX) chief regulatory officer Tan Boon Gin said on Thursday.

Writing in the market operator's Regulator's Column, Mr Tan noted that such convertibles, which carry floating conversion prices pegged to a fixed discount formula and therefore have the potential to create runaway dilutive scenarios, "can have significant negative effect on the company and its existing shareholders".