SGX Regco suspends new entries to watch list; expedites fund raising

Singapore

SINGAPORE Exchange Regulation (SGX RegCo) will suspend entry into its financial watch-list and give expedited clearance to fund-raising efforts by mainboard issuers.

The frontline market regulator has been in consultation with the Monetary Authority of Singapore (MAS) and has decided to introduce the measures to support issuers and ease the financial strain caused by the Covid-19 pandemic.

"Covid-19 has caused a drastic global deterioration in business conditions for all companies, with many experiencing significant loss of revenue and profitability," SGX RegCo said on Wednesday.

It added: "Share prices of companies have also fallen, translating to sharp declines in market capitalisation. Companies are also likely to face liquidity crunch at this time as banks are tightening credit."

The benchmark Straits Times Index (STI) has lost 22 per cent since the start of the year, as countries shut their borders due to the deadly virus, threatening businesses and jobs.

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SGX RegCo said placing issuers on the financial watch-list during this trying period might cause "undue prejudice to companies in navigating the business challenges in this climate".

Companies on the SGX watch-list are compelled to turn around their financial performance after three years of losses and when market capitalisation falls below S$40 million. There are currently 44 companies on the financial watch-list.

SGX RegCo will provisionally suspend the half-yearly reviews on the first market days of June 2020 and December 2020 to place issuers on the financial watch-list.

"The suspension is to enable our issuers to focus on meeting the current business and economic challenges and dealing with any resultant liquidity crunch," SGX RegCo said.

Companies that meet the exit criteria, however, will continue to be able to exit the watch-list.

To help mainboard issuers with potential liquidity issues, SGX RegCo will also allow companies to seek a general mandate for an issue of pro-rata shares and convertible securities of up to 100 per cent of share capital.

This is an enhancement from a 50 per cent share issue limit previously. It excludes treasury shares and subsidiary holdings in each class, and is effective from April 8, 2020 until Dec 31, 2021.

SGX RegCo stressed that the limit on the total number of shares and convertible securities issued other than on a pro-rata basis remains at not more than 20 per cent. Shareholder approval must be obtained at the company's annual general meeting or by convening an extraordinary general meeting (EGM).

The enhanced share issue limit is subject to various conditions, including confirmation by the board of directors that it is in the interests of the company and shareholders and that it is in compliance with legal requirements. The issuer must also disclose in the notice of the general meeting why the directors believe the enhanced share issue is in the interests of the company and shareholders, and their basis for forming such views.

The notice does not have to be cleared with SGX RegCo and no circular is required.

David Gerald, founder and chief executive of the Securities Investors Association Singapore (Sias) said that SGX RegCo's measures are "timely assistance". He added: "This is yet another useful initiative by SGX RegCo to help issuers to cope with the ill-effects of Covid-19. It enables the issuers to raise funds to keep alive their business. This is good for not only the companies but also their shareholders."

On the enhanced share issue limit for mainboard issuers, Mr Gerald noted: "This will enable the issuers to raise funds expeditiously to meet liquidity needs. SGX RegCo deserves a pat on the back for its timely assistance rendered to struggling issuers."

In response to queries on why fund raising has been expedited only for mainboard issuers, SGX RegCo said Catalist companies already have larger mandates for fund raising.

Under Catalist Rule 806(2), if shareholders approve the mandate by special resolution, the limit on the total number of shares and convertible securities issued - whether on a pro rata or non pro rata basis - may be up to 100 per cent of the total number of issued shares, excluding treasury shares and subsidiary holdings.