[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