ASX has recently released proposed amendments to the ASX Listing Rules to reduce the standard timetable for traditional rights issues and introduce standard timetables for accelerated rights issues.
In July 2012, ASX released a consultation paper examining the scope and opportunities for reducing the standard timetable for rights issues. In its consultation, ASX was seeking to address a key weakness of traditional rights issues - that market conditions may change during the offer period which may impact on the success of the rights issue and the costs to the company. ASX was also aiming to facilitate greater flexibility in capital raising mechanisms and to better accommodate the needs of a diverse range of ASX-listed companies across the credit cycle.
This consultation has concluded and ASX has released an exposure draft of proposed amendments to the Listing Rules. The proposed changes seek to address ASX’s concerns in two key ways:
- shortening the traditional/standard timetable for rights issues from 26 to 19 business days, and
- proposing standard timetables for non-traditional rights issues (such as accelerated rights issues) thereby removing the need for certain Listing Rule waivers for most types of accelerated rights issues.
Accelerated rights issues, also known as accelerated entitlement offers, are broadly, an offer to shareholders to acquire new shares at the same offer price and in proportion to their holdings that proceeds in two tranches:
- an initial (accelerated) institutional component, and
- a secondary (non-accelerated retail component).
Depending on the uptake of institutional shareholders this structure enables companies to raise a large proportion of funds offered from the institutional shareholders very quickly, thereby reducing market risk for these companies (and any underwriters) and potentially reducing the discount required to raise the capital.
Set out below are the current and proposed timetables for traditional rights issues as well as the proposed timetables for accelerated rights issues.
Click here to view table.
Another proposed change is to amend the definition of ‘pro rata issue’ to include most types of accelerated rights issues. This change will ensure that most types of accelerated rights issues fall within the exceptions to ASX Listing Rule 7.1 and therefore not count towards the important limit of 15% of issued capital that can be raised every 12 months without shareholder approval. This change will remove the need for (and current practice of) most companies undertaking accelerated rights issues applying for ASX waivers for this purpose.
If implemented, it is expected that the potential benefits of the changes to the traditional rights issue timetable will include a reduction in the level of risk associated with possible changes in the market conditions during the life of a rights issues and reduced costs of undertaking rights issues.
ASX has stated that implementation of the new timetables will not occur before January 2014 to allow development work and testing as well as sufficient lead time for market users to put in place any necessary operational or technological changes.