Mark Oliphant, Head of Communications at The International Stock Exchange Group, explores the trend for Asian corporates to list debt on The International Stock Exchange (TISE)

The International Stock Exchange (TISE) is a unique listing and trading venue which is based in Europe – but outside of the EU – in the Channel Islands of Guernsey and Jersey and with another office in the other British Crown Dependency, the Isle of Man. The business has been established since 1998 and today there are more than 3,000 securities with a total market value of more than £400 billion listed on TISE.

Equity listings comprise a pool of predominantly ‘domestic’ trading companies, as well as SMEs based in the UK, and investment vehicles such as Guernsey and Jersey domiciled funds and UK Real Estate Investment Trusts (REITs). Debt securities make up the largest proportion of listings on TISE, with issuers ranging from smaller UK corporates right through to multinational organisations.

Asian backed issuers

The truly international nature of the market is reflected by the fact that there is a growing trend for Asian backed issuers to list debt on TISE.

These listings have included issuers which are incorporated in the region itself, for example Hong Kong, however often the issuing vehicles will be formed in the British Virgin Islands or Cayman Islands, although from a listing perspective there is no reason why these cannot instead be Guernsey or Jersey domiciled entities.

Another key feature of these structures is that they are often issuing debt under New York law to investors who are in some cases qualified institutional buyers within the meaning of rule 144A under the US Securities Act of 1933, or outside the USA (to non-retail noteholders) in compliance with Regulation S under the Securities Act.

To date, the issuances have typically comprised an interest coupon of between 5% and 15% and a maturity of between one and five years and often the arrangements include the presence of both a Keepwell Provider and a Personal Guarantor.

Case studies

TISE played a role in a ground breaking property deal when the Exchange became home to US$4.1 billion worth of bonds which were listed as part of the financing for what at the time was the world’s most expensive real estate transaction for a single building. The bonds were issued by CHMT Peaceful Development Asia Property Limited to finance the acquisition of Hong Kong’s fifth largest skyscraper, The Center. The bonds were listed on TISE in two tranches, of approximately US$3.3 billion Tranche A notes and US$800 million Tranche B notes, with an 18 month maturity. The Jersey office of law firm Walkers acted as listing sponsor and adviser to CHMT Peaceful Development Asia Property Limited, working with their counterparts at Ashurst in Hong Kong.

"there is a growing trend for Asian backed issuers to list debt on TISE"

This is one of several Chinese-origin issuances we have seen coming to TISE in the last 18 months. It follows a period of gradual but sustained growth following from the listing of three series of notes by China Cinda Finance Finance (2014) II Limited in 2015. At the time, these notes represented the first securities to be listed on the Exchange by an issuer with an ultimate parent company domiciled in China, which is China Cinda Asset Management Company. The offices of Mourant in Hong Kong (and Guernsey) worked with their counterparts at King & Wood Mallesons and Davis Polk & Wardell LLP to complete the transaction.

Why TISE?

These types of issuers are attracted to TISE by the fact that it is a specialist global debt market with sensible rules and providing speedy turnaround of applications at a competitive price.

TISE has a service delivery framework which means responses to initial applications are made within 3 business days from submission and subsequent reviews will be carried out within 2 business days. This provides issuers with speed and certainty, while the Exchange is also able to consider more unusual transactions and move quickly to introduce new products.

TISE’s initial and annual fees are set according to product type, rather than varying by market capitalisation like some other markets, which again provides issuers with certainty. For example, an issuer of one (non-high yield) security class of debt securities being marketed to non-retail investors would incur an initial fee of £5,200 (US$6,720) and an annual fee of just £1,200 (US$1,550). This is competitive with other similar markets and more reasonable than larger exchanges, considerably so in some cases.

"TISE... is a specialist global debt market with sensible rules and providing speedy turnaround of applications at a competitive price"

TISE’s Listing Rules, which include specific sections on equity and debt, have conditions for listing, disclosure requirements and continuing obligations which are proportionate to the type of product and the targeted investor base. For instance, the disclosure requirements for debt being market to retail investors in enhanced in comparison to those for debt being marketed to non-retail investors. This sensible approach to the application of regulation is appreciated by issuers, especially those whose investor based comprises institutional and professional investors seeking to hold securities for the long term.

Issuers can also rely on the fact that TISE is a Member of the Quoted Companies Alliance (QCA) and its market authority is an Affiliate Member of the International Organisation of Securities Commissions (IOSCO) and an Affiliate Member of the World Federation of Exchanges (WFE). In addition, TISE has several international recognitions which not only enhance its credibility but often also provide other benefits to issuers, such as widening the eligible investor base of TISE-listed products.

For example, the UK tax authority, Her Majesty’s Revenue & Customs (HMRC), deems TISE to be a Recognised Stock Exchange for the purposes of being an applicable listing venue for UK REITs, an eligible market for investments from Self-Invested Personal Pensions (SIPPs) and Individual Savings Accounts (ISAs), and issuers being able to avail of the Quoted Eurobond Exemption (QEE).

Other recognitions include the US Securities and Exchange Commission (SEC), the Australian Securities Exchange (ASX) and the German regulator, BaFin. The former means that TISE is approved by the SEC as a Designated Offshore Securities Market (DOSM) within the meaning of Regulation S under the US Securities Act of 1933. The latter means that TISE-listed products are automatically eligible assets as part of the listed investment allocation of German insurance companies and German UCITS funds. UCITS funds from many EEA jurisdictions can also invest into TISE-listed products.

How to list on TISE

An issuer must have a TISE Listing Member appointed as a Sponsor or Listing Agent while it is an applicant for listing or is listed. The Sponsor/Listing Agent acts as an intermediary between the issuer and the Exchange and responsibilities include preparing and lodging the formal listing application via the online information hub, TISE Portal.  

To start, the issuer, via the Sponsor/Listing Agent, files an initial submission with documents in draft. Once the submission meets the minimum information requirements then an analyst is assigned to the application. The application is reviewed and a recommendation is made on the issuer’s suitability for listing which is considered by the market authority’s Listing and Membership Committee (LMC). Within three business days from submission of the initial application and subject to payment of the initial fee, a comments letter is released which outlines the LMC’s determination in respect of suitably for listing, any remedial work which is required to the application or additional information which is required to be submitted.

"TISE had the most successful first six months of a year since inception, despite COVID-19"

For each subsequent review of the application, TISE will respond within two business days. Final applications which are received before midday (UK time) can be considered and approved by LMC for admission at either 18:00 that evening or 08:00 the following morning. Once approved and subject to payment of the first annual listing fee, a grant of listing letter is released and the security is admitted to listing and trading at the relevant time, at which point it will be added the Official List that is maintained on the TISE website.

The future

During the listing process, an issuer can also make a simultaneous or subsequent application for entry to TISE’s green market segment, TISE GREEN. This incurs no extra cost and it is open to all types of investments which are aimed financing the protection or enhancement of the environment but they must be first admitted to TISE’s Official List and also have third party verification of their green credentials against a globally recognised standard.

TISE has seen growth in the number of listings coming to the market which are financing green or wider sustainable and social initiatives. This has accelerated since the onset of the coronavirus (COVID-19) global pandemic when we have also seen issuances resulting from corporate refinancing across various sectors. Essential refinancing has tended to be in the highest COVID-impacted sectors of retail, entertainment and travel, with the more opportunistic in the technology, media and telecoms sectors which have fared best and even seen growth in the current circumstances.

With 390 securities admitted in the first half of this year, TISE had the most successful first six months of a year since inception, despite COVID-19 and applications have continue to hold up well as issuers from across the globe are attracted by the cost efficiency and responsive service offered by a nimble and agile market.

Originally published in the November issue of Asia Business Law Journal.