[Federal Register Volume 59, Number 22 (Wednesday, February 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2320]


[[Page Unknown]]

[Federal Register: February 2, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33531; File No. SR-NYSE-93-49]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc. Relating to Bond Listing 
Standards

January 27, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on December 
22, 1993, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') the proposed rule change as described in Items I, II and III 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would enable the Exchange to simplify and 
relax its standards for the listing and delisting of debt securities.
    The complete text of the proposed rule change is available at the 
Office of the Secretary, NYSE, and at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to revise its standards for the listing 
and delisting of debt securities. In particular, the Exchange seeks to 
clarify and simplify its debt security listing standards.
    The Exchange hopes to make an Exchange listing more accessible for 
issuers of debt securities and to facilitate the listing of debt 
securities. The Exchange's goal in both cases is to augment the number 
of listed debt securities. The Exchange believes that this will serve 
the public interest because it will subject a greater number of debt 
securities to the Exchange's trading and disclosure systems.
    In order to accomplish these goals, the Exchange proposes to rely 
upon the Exchange's equity listing and maintenance standards in 
determining whether issues can adequately demonstrate that they can 
meet interest obligations on debt securities. That is, where an issuer 
has common stock listed on the Exchange and is in good standing, the 
Exchange would normally list the issuer's debt security issues of $5 
million or more. Because the debt security enjoys seniority over the 
equity issue, the ``good standing'' test warrants listing the debt 
security.
    Where the issuer of a debt security does not list its common stock 
on the Exchange, the Exchange proposes to rely upon the analyses of 
nationality recognized securities rating organizations (``NRSRO'') for 
the interest-coverage determination.
    For those purposes, the Exchange proposes to make the following 
changes to Paragraphs 102.03, 103.05, 703.06, 801.00 and 802.00 of the 
Exchange's Listed Company Manual:
    Under Paragraph 102.03:
     As at present, the Exchange would require the issue to 
have a market value or principal amount of $5 million.
     The Exchange would no longer require the issuer to 
demonstrate on a pro forma basis interest coverage on all debt 
securities.\1\
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    \1\Currently, Paragraph 802.00 deems coverage to be 
``inadequate'' if interest charges on all debt issued by the 
company, its parent or a subsidiary exceed pro forma earnings 
(before or after taxes) as reported in a filing to the Commission.
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     The Exchange would no longer evaluate the anticipated 
distribution of a debt security. (The proposed rule change proposes a 
conforming change to Paragraph 703.06 to remove a mention of the 
distribution requirement.)
     The Exchange would not longer require convertible debt 
securities to be convertible only into common stock listed on the 
Exchange, although the Exchange would require that equity securities 
underlying convertible securities be subject to a real-time last sale 
reporting obligation.
     I the case of debt securities proposed to be listed by 
``unaffiliated'' issuers:
    An NRSRO must have assigned a current rating to the issue that is 
no lower than the ratings in the S&P Corporation ``B'' category (i.e., 
``B-'' or better) or another NRSRO's counterpart to the S&P Corporation 
rating.
    Alternatively, if no NRSRO has assigned a rating to the issue, an 
NRSRO must have currently assigned either an investment grade rating 
(i.e., an S&P Corporation rating no lower that P``BBB-'' or another 
NRSRO's counterpart to the S&P Corporation rating) to a senior issue 
or, in the case of a pari passu \2\ or junior issue (including a 
preferred stock or debt security issue), a rating no lower than the 
ratings in the S&P Corporation ``B'' category (i.e., ``B-'' or better) 
or another NRSRO's counterpart to the S&P Corporation rating.
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    \2\A pari passu issue would have equal standing with the debt 
issue to be listed.
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    In the case of a listing for an unrated issue that is junior to an 
issue with an investment grade rating, the Exchange notes that a junior 
issue would generally be rated no more than one rating category below 
an immediate senior issue. Thus, the Exchange feels that such an 
unrated debt issue seeking to list would, if it were rated, receive a 
rating that satisfies the minimum ``B-'' rating standard. All other 
unrated debt issues of unaffiliated issuers must either be senior to or 
pari passu with an issue rated at least ``B-'' in order to qualify for 
listing on the Exchange.
    An ``unaffiliated'' issuer is one that has no equity securities 
listed on the Exchange; is not, directly or indirectly, majority-owned 
by, nor under common control with, an issuer of Exchange-listed equity 
securities; and is not issuing a debt security that an issuer of 
Exchange-listed equity securities is guaranteeing.
    Paragraph 103.05 makes the same changes to the listing standards 
for the debt securities of non-U.S. companies as Paragraph 102.03 makes 
in respect of the standards for domestic debt securities.
    Under Paragraph 810.00, the Exchange proposes to review the 
continued listing of a debt security convertible into an equity 
security when the equity security is delisted. In addition, the 
Exchange proposes to delist a debt security when the underlying equity 
security ceases to be subject to real-time trade reporting.
    Under Paragraph 802.00, the Exchange would no longer view 
inadequate interest coverage of an issuer or its parent or a subsidiary 
as reason for delisting a security.\3\
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    \3\See supra, note 1.
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    In the case of a sovereign issue, the Exchange will evaluate 
whether to list the issue for trading on a case-by-case basis. The 
Exchange's current policy in respect of municipal securities is to list 
initially only term/dollar bonds.\4\
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    \4\A term/dollar municipal bond is issued with a single maturity 
date (as opposed to a serial bond), and is quoted in dollars or as a 
percentage of its par value (rather than by yield). As such, it 
resembles a corporate bond. Telephone conversation between Fred 
Siesel, Director, Fixed Income Markets, NYSE, and Beth Stekler, 
Attorney, SEC, on January 7, 1994.
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    The Exchange believes that it should extend to a broader universe 
of debt securities the benefits that derive from the Exchange's unique 
bond market and price disclosure mechanism, especially for individual 
bond holders and small to mid-sized institutions. The debt security 
listing standard modifications that the proposed rule change proposes 
would effect such an extension to the betterment of the community of 
investors and debt securities.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5) that an exchange have rules that are 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on the proposed rule change. The Exchange has not received any 
unsolicited written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the publication of this notice in the Federal 
Register or within such other period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Station, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the NYSE. All 
submissions should refer to File No. SR-NYSE-93-49 and should be 
submitted by February 23, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2320 Filed 2-1-94; 8:45 am]
BILLING CODE 8010-01-M