Define Issue of Debt Instruments

Debt instruments mean non-convertible securities which create/ acknowledge indebtedness and include debentures, bonds, and other securities of a body corporate/statutory body constituted by virtue of legislation. It excludes –

Bonds issued by Government/other bodies specified by SEBI

Security receipts

Securitized debt instruments

Methods of Issue

Public issue: It is a public offer by an issuer to subscribe the debt securities.

Private Placement: It is an offer to less than 50 persons to subscribe to debt securities

Elements o SEBI Regulations: The main elements of Issue requirements for public issue Listing of debt instruments Conditions for continuous listing and trading Obligations of intermediaries and issuers

Issue Requirements for Public Issue

Issuer cannot make public issue of debt securities if he has been prohibited / debarred by the SEBI from dealing in securities.

Application should have been made to a recognized stock exchange for their listing.

Should have obtained in principal approval.

Credit rating should have been obtained from a credit agency registered with SEBI, it should be disclosed in the offer document along with all the ratings including the unaccepted ratings.

An agreement should be entered with a SEBI Registered Depository for their dematerialization.

The issuer should appoint SEBI Registered Merchant Bankers. One of them should be the lead manager.

The issuer should appoint debenture trustees

Debt securities should not be issued to provide loan to any person who is part of the same group/same management

As per the company act provisions, the issuer should create Debenture Redemption Reserve.

Listing of Debt Securities

The listing of debt securities is mandatory. The issuer should comply with the conditions specified in the listing agreement. Under private place-ment basis the issue should comply with provisions of company act/rules, credit rating should have been obtained from the SEBI Registered agency, the securities are listed demat from the required disclosures are made.

Conditions for Continuous Listing or Trading

Under the private placement basis the conditions of listing specified in the listing agreement should be complied with Rating should be periodically reviewed by the rating agency.

Any revision in the rating should be promptly disclosed the concerned stock exchange.

Rating changes should be communicated the investors.

The trading of debt securities issued to public are on private placement basis should be cleared/settled in recognized stock exchanges. This is subject to condition specified by SEBI.

As regards securities made over the counter, the trade should be reported on a recognized stock exchange. This stock exchange should have a nationwide trading terminal/ other platform specified by the SEBI.

Obligations of Intermediary and Issuers

Debenture trustees: protecting the interest of the security holders for this purpose they should have the required power including the right of a nominee Board of director.

Performing their functions as per the regulations of SEBI debenture trustee regulation/trust deed with care diligence and loyalty.

Supervising the implementation of conditions regarding creation of security and debenture Redemption reserve.

Ascertaining disclosure of all material events.

Issuer/lead Merchant Banker

The disclosures made by the issuer should be true fair and adequate. There should be no misleading, untrue statement/misstatement. All material facts should be disclosed by the issuer in the offer document.