Those issuers, corporate services providers, collateral managers, servicers and special servicers that regularly submit debt announcements on the Irish Stock Exchange will know how straightforward and quick it is to submit. For those that don’t, at present this process involves simply sending a copy of the notice or announcement to the email address email@example.com and the publication is free of charge if a Word version of the notice is sent. This quick and easy process enables the issuers (or their agents or lawyers on their behalf) to publish announcements promptly to ensure compliance with the Irish Stock Exchange listing rules and the relevant issuer’s regulatory and transparency obligations under the Market Abuse Directive 2003/6/EC of the European Parliament as implemented by the relevant member states.
However, the process (and the cost) is set to change quite substantially on and from 1 July 2013.
The Irish Stock Exchange proposes to replace the existing process with one that is more formalised but also more time consuming and costly. The new process will involve each participant registering through an as yet unopened online platform where announcements can be electronically published. These participants must submit the following information to publish each notice: (a) whether a document is being filed or an announcement published; (b) issuer name; (c) issuer domicile; (d) issuer VAT number; (e) invoicing contact and company details; (f) method of payment; and (g) when the notice should be published (that is, immediately or at a future time and date).
This is a significant departure from the previous process but not one on the face of it that should cause too many problems for corporate debt issuers – in light of the limited information that needs to be submitted. But how will this affect the corporate services providers, collateral managers, servicers and special servicers that manage and service hundreds and thousands of issuing vehicles, each now to be subject to this new process?
After initially reviewing the update provided by the ISE, I was concerned that service providers would have to separately register each issuing entity they manage or service. However, having enquired with the ISE, I understand that each service provider need only register themselves and this will allow them to publish announcements in respect of any of the issuing entities that they manage. In many cases, it is the collateral managers, servicers, special servicers or their lawyers that have customarily submitted the notices for publication on the ISE on behalf of the issuers, provided they have the relevant issuer and trustee approval. This will not change under the new proposals but it is now these parties that will need to have registered an account with the ISE. The ISE are still considering how the authorisation process will work and whether specific individuals will need to be named, whether a more general authorisation for each issuer is more appropriate or whether submission of a notice will include a representation that the party submitting is authorised; so at this stage, the outcome on authorisation is uncertain.
However, one thing is certain: there will be a significant increase in the costs of making announcements on the ISE, which will depend on the method of payment selected by the party making the announcement.
There will be three payment options:
- Online payment – RealEx or PayPal
- Prepaid transfer on account (a minimum of €5,000)
- Invoice-based post payment
If the methods (1) or (2) (that is, payment is made at the time of submission or deducted from a pre-funded account) are used the costs will be:
- €150 excl. VAT per Announcement in Word format
- €200 excl. VAT per Announcement in PDF format.
If invoice-based post payment (that is, where an invoice is generated and submitted for payment after the publication) is chosen the costs will be:
- €300 excl. VAT per Announcement in Word format
- €350 excl. VAT per Announcement in PDF format.
The ISE has said it “intends to provide interested entities with an opportunity to register online a number of weeks prior to July 1st 2013”. I hope the number of weeks is more than two but in any event, I hope this is enough time for the service providers to complete their registration and set up their authorised persons/organisations (however that ends up being resolved by the ISE). Whatever the uncertainty at this stage, we should be thankful that we don’t have to register each individual issuer by 1 July….
We expect to receive further information regarding the registration, process and payment procedure in June 2013. In the meantime, corporate debt issuers, corporate services providers, servicers, special servicers, collateral managers and their lawyers will need to ensure that they are prepared and will be able to complete the registration before the 1 July 2013 deadline. The consequences of not registering will be important – including the civil and criminal sanctions related to market abuse offences arising as a result of a failure or inability to adequately publish inside information to the public.
A few preliminary considerations to bear in mind are how this new process impacts on the existing operations of you as a service provider including consideration as to which method of payment is most appropriate. For example, it might be prudent for a service provider to have an amount on account to take advantage of the 50% discount for submission of the Word version of a notice and recover this from the relevant issuer as a disbursements in its fees costs and expenses indemnities. Whilst this might be efficient for the issuing vehicle and the ISE (due to the restrictions on payments by the issuer other than on note payment dates) the service providers may well be incurring significant additional costs up front and having to wait 90 days until the next payment date for reimbursement as it’s unlikely these interim payments will be authorised under existing documentation. If not, the issuing vehicle will just have to bear the higher costs and payments made directly by them under the waterfall on the note interest payment date, which will mean the ISE has to wait those 90 days. In either case, it will not be welcomed by those transactions that are afflicted by an administrative expenses cap, which in many cases have significant accumulated costs not being paid on each note payment date.
We at Reed Smith will be monitoring the new procedures and remain ready to assist as and when it becomes clear what is required of our clients.