Last month, Times Business reported that three corporate bonds will be issued between July and September totalling €80 million. Sources are quoted as saying that this is very good news for investors, that is, the bond issuers, as it shows that the changes made to the listing rules last March had the desired effect.

One may ask: what were the changes made to the listing rules? Mainly these involved the scrapping of the condition to bond issuers to put aside annual amounts in a sinking fund so that the issuer would be in a better position to repay the bondholders on maturity. In fact, this requirement only covered part of the bond amount but at least the bond holder had some limited comfort through this arrangement.

Thus, the obligation to provide a sinking fund was waived except in those few and exceptional cases where the bond is repayable from the sale of the asset funded by the bond. One of the arguments to justify this decision was that the condition could have inhibited new bond issues, pointing out that only two non-financial companies tapped the bond market since 2010.

But why should such a condition inhibit bond issuers who are reasonably confident of the success of their venture and of the attainability of their financial projections? Would they not have to meet annual loan repayments in any case had they opted to raise their requirements from a bank, when additionally the latter would have been more than willing to allow suitable moratoria where these are justified?

Perhaps the possibility to repay the bond in one lump sum on maturity, or resort to a roll-over exercise in case of difficulties, without the discipline to provide for a sinking fund, makes the tapping of the bond market more attractive to investors, even if they have to pay a higher interest rate; more so when they do not always have to secure their bond

When asked how they would deal with any possible deterioration in economic conditions or changed market sentiment five or 10 years down the road should they need to resort to a rollover exercise at maturity, they would reply that they will cross that bridge when they come to it. Against this background and the incidence of local rollovers at maturity dates it is easy to appreciate why the authorities used to insist on the provision of a sinking fund before March 2013.

New corporate bond issues generate a certain activity in the bond market and therefore good income to stockbrokers, legal advisers and consultants and financial intermediaries who no doubt lobbied strongly for these changes and it is understandable why this is good news to them.

But surely this is not good news to the small bond holder who, in the absence of any compensation scheme in the bond market similar to that obtaining in the banking sector, was better protected before March 2013 through the provision of a sinking fund.