The Zimbabwe Stock Exchange has set a minimum amount of $1 million for institutions who want to raise capital through the issuance of debt securities. According to the debt listing rules which are currently awaiting gazetting after they were approved by the Securities and Exchange Commission in mid-June, applicants for listing debt securities must have the intention of raising at least $1 million, in full, through issuance of securities of at least one-year tenure.The rules reflect, inter alia, the rules and procedures governing new applications and the on-going obligations of Issuers, and are aimed at providing investor confidence via an orderly, secure, efficient and transparent financial market.
The requirements also allow for the issuance of specialised products such as asset-backed Debt Securities and High Yield Debt Securities while guidelines are provided for the issuance of securities by the public sector.
The potential issuers of the bonds would be Government, all quasi-Government institutions such as the utilities like ZESA, ZINWA.
According to the rules, an applicant issuer must have published and submitted financial statements which have been prepared in respect of at least the last three financial years.
If more than 9 months have lapsed since the last financial year-end, reviewed interim financial statements for the current financial period must be submitted to the ZSE, in addition to the financial statements for the last three financial years.
The rules say that the issue document must contain among other items the interest rate, the date from which interest accrues and due dates of payments in respect of the Debt Securities must be fully described.
If several interest rates are provided for, an indication of the calculation/conditions for changes in the interest rate must be included.
The interest calculation and/or method for each Debt Security must be set out in the Placing Document; the maturity date of the Debt Security, if applicable, and circumstances of the repayment and redemption are to be fully described and details of any legal restrictions under which the Debt Securities will be offered, sold, transferred or delivered.
The documents should also contain a description of the material risk factors and the sensitivity of the issue of Debt Instruments to such risk factors must be provided (securitisation, derivative and any other type issues).
The risk factors must not only include matters concerning the business and financial condition of the Applicant Issuer, but also such matters (when applicable) like the absence of an operating history, the absence of profitable operations and future projections.
The rules also say that all Debt Securities to be listed on the ZSE shall be cleared and settled through the CSD or any other system approved by the ZSE to perform electronic settlement of funds and scrip from time to time.
The issuers will be subjected to document fees, initial listing fees and annual listing fees. The rules say if the legal entity issuing a bond is already listed either on the ZSE Main Board or ZEEM-- then the issuer shall pay 50 percent of the applicable annual debt listing fees. The ZSE is also proposing to charge about 0,11 percent to issuers for corporate actions.
