Up to €80m worth of bond issues possible

The Stock Exchange has published its “tentative” listing calendar, indicating three corporate bond issues between July and September which could add up to €80 million.

The calendar indicates a €10m bond issue in July, and two in September for €40-50m and for €15-20m.

Sources said it was likely that at least one of these bond issues would be a new one, while the others could be rollovers of existing bonds.

“This is very good news for investors as it shows that the changes made by the Malta Financial Services Authority to the listing rules have had the desired effect,” the sources said.

“Certainly this could also be due to the forecast turnaround in the economy and could mark an end to the political stability which could have resulted in investment decisions being put on hold. But we believe that it is primarily the result of the changes made to the listing rules. Bonds give companies a chance to raise capital with benefits to their credibility, their brand, and even their capital gains.”

The MFSA changed the 2010 listing rules on March 5 following a brief consultation period.

The 2010 rules had imposed more stringent rules in the use of sinking funds assets as well as obligations on the sinking fund custodian. Other changes were then made in December 2011, which introduced yet more conditions.

Only two non-financial companies tapped the bond market since August 2010, and even these were issued to finance redemptions due, according to financial analyst Edward Rizzo in his March 14 column.

Reacting to feedback from prospective bond issuers, stockbrokers, legal advisors and financial consultants, the MFSA finally did away with the sinking fund requirement except when the source of eventual repayment of the bond is to come from the sale of the asset acquired through the funds raised.

The removal of the need for a sinking fund has made bond issues a feasible alternative to bank financing. Bonds are regarded as an important way to diversity the investment product range available in Malta, complementing the higher risks associated with some other financial products that offer higher returns.