[Federal Register Volume 60, Number 182 (Wednesday, September 20, 1995)]
[Notices]
[Pages 48734-48736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23293]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36225; File No. SR-Amex-95-29]


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

September 13, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
July 19, 1995, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') 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 Amex proposes to amend Exchange Rule 703 and Sections 104, 216, 
330 and 1003 of the Amex Company Guide.

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
    In light of recent rule changes adopted by the Commission,\1\ as 
well as significant rule changes implemented by the New York Stock 
Exchange 

[[Page 48735]]
(``NYSE''),\2\ all to facilitate the exchange listing of debt 
securities, the Amex has similarly reviewed its rules and policies with 
a view towards making the Exchange more accessible to debt issuers and 
facilitating the listing of such securities. The Exchange believes that 
it is important to both investors and companies that the Exchange be 
able to list debt securities more easily, as an Exchange listing 
provides debtholders with a transparent auction market for secondary 
trading.

    \1\Recently, the Commission took action to make it easier for 
exchanges to list debt securities, removing restrictions that 
existed for listed debt securities but not for over-the-counter 
traded debt securities. Among other things, the Commission made 
inapplicable to listed debt certain Commission borrowing 
restrictions and proxy rules, none of which are applicable to 
unlisted debt. See Securities Exchange Act Release No. 34922 
(November 1, 1994), 59 FR 55342 (November 7, 1994).
    \2\In Securities Exchange Act Release No. 34019 (May 5, 1994), 
59 FR 24765 (May 12, 1994), the Commission approved amendments to 
the NYSE listings standards for debt that were similar to this Amex 
proposal.
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Original Listing Guidelines

    Currently, the Amex applies its original listing guidelines\3\ in 
evaluating the listing eligibility of an issuer of debt securities. The 
Exchange also specifies that the issuer should be able to demonstrate 
that it appears to be in a financial position sufficient to 
satisfactorily service the debt issue to be listed. The debt issue 
should be at least $5 million in principal amount and aggregate market 
value, for issuers whose common stock is traded on the Amex or the 
NYSE, or $20 million with at least 100 holders, for non-listed issuers. 
The Exchange will consider delisting a bond issue if the aggregate 
market value or the principal amount of the bonds publicly held is less 
than $400,000.

    \3\The Exchange guidelines provide for the issuer to have 
stockholders' equity of at least $4,000,000 and pre-tax income of at 
least $750,000 in its last fiscal year, or in two of its last three 
fiscal years.
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    The Exchange proposes to replace its numerical listing guidelines 
with new guidelines based on issuer or bond rating status. Under these 
new guidelines, if an issuer has equity securities listed on the Amex 
or NYSE, and is in ``good standing,''\4\ the Exchange will normally 
list that company's debt securities so long as they have an aggregate 
market value or principal amount of at least $5 million. If an issuer 
does not have equity securities listed on the Amex or NYSE, the Amex 
will rely (as set forth below) on the analyses of nationally recognized 
securities rating organizations (``NYSROs''),\5\ such as Standard & 
Poor's or Moody's.\6\

    \4\A company is in ``good standing'' if it is above the relevant 
continued listing guidelines.
    \5\See Securities Exchange Act Release No. 34616 (August 31, 
1994), 59 FR 46304 (September 7, 1994) (Concept Release discussing 
Commission's oversight role with respect to NRSROs).
    \6\Like the NYSE, the Exchange will not conduct a review in 
either instance to determine whether the issuer satisfies its 
original equity listing guidelines.
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    Specifically, the Exchange proposes to make the following changes 
to Section 104 of the Amex Company Guide:
     Eliminate the guideline calling for a debt issuer to 
satisfy the size and earnings guidelines applicable to issuers listing 
common stock;
     Eliminate the guideline calling for the issuer to 
demonstrate that it will be able to satisfactorily service the debt 
issue to be listed;
     Eliminate the guideline calling for non-listed issuers to 
have at least 100 holders;
     Permit the Exchange to list a debt issue if it has an 
aggregate market value or principal amount of at least $5 million (as 
opposed to aggregate market value and principal amount of $5 million);
     Permit the Exchange to list debt securities that are 
issued or guaranteed by an issuer which has equity securities listed on 
the Amex or NYSE (or which is affiliated with a listed issuer); and
     Permit the Exchange to list the debt securities of 
``unaffiliated'' issuers\7\ if an NRSRO has assigned a current rating 
to the debt security that is no lower than an Standard & Poor's 
Corporation ``B'' rating (i.e., B- or better) or the equivalent rating 
of another NRSRO. A ``B'' rating indicates that the debt issuer 
currently has the capacity to meet interest payments and principal 
repayments, and that such capacity is not dependent upon favorable 
business, financial or economic conditions. 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 or equivalent rating no lower 
than ``BBB-'') to a senior issue or a rating that is no lower than an 
S&P ``B'' rating (or equivalent) to a pari passu or junior issue.\8\

    \7\An ``unaffiliated'' issuer is one that has no equity 
securities listed on the Exchange or the NYSE, and is not affiliated 
with or guaranteed by an issuer of Amex (or NYSE)-listed equity 
securities.
    \8\An S&P debt rating is a current assessment of the 
creditworthiness of an obligor with respect to a specific 
obligation. The ratings range from ``AAA'' to ``D.'' Debt rated 
``AAA'' has the highest rating assigned by S&P because the capacity 
to pay interest and repay principal is extremely strong. 
``Investment grade ratings'' include bonds rated in the top four 
categories (``AAA,'' ``AA,'' ``A,'' and ``BBB''). Bonds rated 
``CCC'' or lower are dependent on favorable business, financial or 
economic conditions to meet timely payments of interest and 
repayment of principal. Debt rated ``D'' is in default.
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    The Exchange is also proposing to be able to list municipal and 
sovereign bonds (i.e., the debt of foreign governments, American states 
and localities, or government agencies).\9\ The Exchange will evaluate 
whether to list these issuers on a case-by-case basis and will treat 
the issuer as an ``unaffiliated'' corporate issuer so that the rating 
guidelines described above will have to be met.

    \9\This does not include debt issued or guaranteed by the United 
States Government or agencies thereof that can be admitted to 
dealings on the Exchange pursuant to Amex Rule 140.
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Continued Listing Guidelines

    The Amex will still consider delisting a debt issue if its 
aggregate market value or principal amount is less than $400,000. 
However, the Exchange proposes to amend Section 1003 of the Amex 
Company Guide to clarify that any debt issuer that is unable to meet 
its obligation on the listed debt securities may be delisted. As with 
all the guidelines in Section 1003, this will permit, but not require, 
the delisting of the security in such a circumstance. In applying this 
standard, the Exchange will normally not delist the debt if there is 
value in the security and continued Exchange trading is in the best 
interests of investors. However, if an issuer is unable to meet its 
financial obligations and there is minimal or no value in the security, 
the Exchange will give serious consideration to delisting the bond 
issue. The Exchange will also consider delisting debt that was listed 
based on the issuer being either majority-owned or guaranteed by an 
Amex or NYSE issuer when the equity securities of such owner or 
guarantor are delisted.
    In the case of debt securities that are convertible into equity 
securities, the Exchange proposes to review the continued listing of 
the debt security when the underlying equity security is delisted. The 
Exchange will delist the convertible bond when the underlying equity 
security is no longer subject to real-time trade reporting or if the 
Exchange delists the underlying equity security for violation of any of 
the Exchange's ``corporate governance'' guidelines.\10\

    \10\The Amex Company Guide contains guidelines regarding, for 
example, conflicts of interest, independent directors, quorum, and 
remedies available to bondholders upon default.
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Listing Procedures

    The Exchange also is proposing to simplify the listing process for 
debt issuers by reducing the number of supporting documents that an 
applicant must file in support of its debt listing application. In the 
course of the Exchange's review, several such documents were identified 
as being either unnecessary, duplicative, or unduly burdensome to 
issuers.
    Specifically, the following changes are proposed to Section 216 of 
the Company Guide:
     Schedule of distribution--Since the Exchange is proposing 
to eliminate 

[[Page 48736]]
distribution (holder) guidelines for debt securities, this schedule 
will no longer be necessary.
     Trustee's certificate--The Exchange currently requires a 
certificate from the trustee that shows (1) acceptance of the trust; 
(2) that the securities have been issued in accordance with the terms 
of the indenture; (3) what disposition has been made of securities 
redeemed or refunded; (4) that pledged collateral has been deposited; 
and (5) what disposition has been made of prior obligations. Issuers 
often complain that it is unduly burdensome for them to obtain the 
trustee's certificate because many trustees are reluctant to certify 
the issuer-specific information required by items (2) through (5). 
Therefore, the Exchange proposes to require that the certificate show 
only the trustee's acceptance of the trust. This would conform the 
Exchange's practice to that of the NYSE.
     Listing resolution--The Exchange currently requires bond 
issuers to obtain a resolution of their board of directors authorizing 
the filing of the listing application. This requirement is often 
burdensome to comply with, and can delay a listing if the company's 
board is not scheduled to meet for a month or more. The requirement to 
obtain a listing resolution is essentially ceremonial in nature and 
does not serve any significant purpose. Therefore, the Exchange 
proposes to eliminate this requirement.\11\

    \11\The Commission notes that the NYSE also does not require 
listing resolutions. Like the NYSE, the Amex requires an opinion of 
counsel that the issuance of the debt has been approved by the 
company's board of directors.
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    It is expected that by making the application process less 
burdensome, the Exchange will be able to increase the number of debt 
listings.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
in general and furthers the objectives of Section 6(b)(5) in particular 
in that it is designed to prevent fraudulent and manipulative acts and 
practices, promote just and equitable principles of trade, remove 
impediments to and to perfect the mechanism of a free and open market 
and 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 will impose no burden on competition.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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. 552, will be available for inspection and copying at the 
Commission's Public Reference Section, 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 Amex. All 
submission should refer to File No. SR-Amex-95-29 and should be 
submitted by October 11, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-23293 Filed 9-19-95; 8:45 am]
BILLING CODE 8010-01-M