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Takko switches bond listing to escape MAR "compliance burden"
December 7, 2016 / 4:06 PM / a year ago

Takko switches bond listing to escape MAR "compliance burden"

LONDON, Dec 7 (IFR) - Takko has delisted bonds in Luxembourg and listed them in the Channel Islands, becoming one of the first issuers to relist bonds to circumvent beefed-up EU regulation.

The German fashion retailer on Monday withdrew its 380m 9.875% and 145m floating rate 2019 senior secured bonds from the official list of the Luxembourg Stock Exchange. The securities were admitted to the official list of the Channel Islands Stock Exchange (CISE) the same day.

A growing number of high-yield issuers have listed new bonds on the CISE in a bid to avoid the EU’s market abuse regulation (MAR). These new rules came into effect in July, creating more red tape for issuers with debt listed on exchanges in Ireland and Luxembourg.

The CISE is based in Guernsey - a UK crown dependency that is separate from the UK and outside the EU.

A spokesman for Takko said that in an initial assessment of MAR’s impact they decided that the “regulatory and compliance burden for the company would increase in the future”.

“Furthermore, none of our most direct competitors have comparable reporting obligations,” the spokesman added.

“With the new regulations all of the information we previously only provided to investors and analysts, now are required to be publicly disclosed and therefore fully available to our competitors.”

A number of high-yield issuers use password-protected websites to discretely distribute quarterly results and other announcements to bond market participants, without publicly publishing them.

“I was bit surprised that they specifically stated that they’re doing it to get out from under the market abuse regime,” said a high-yield bond lawyer, but he added that he was not surprised that delistings were starting to occur.

“This is the direction the market is heading.”

IFR reported in August that several issuers were considering delisting from EU exchanges and relisting bonds on the CISE, but Takko is one of the first to take the plunge.

Carlo Oly, head of relationship management at the Luxembourg Stock Exchange, said Takko is only the second issuer to delist from LuxSE and list on the CISE.

“Having more than 10,000 instruments listed on the Euro MTF market, the recent delisting is clearly incidental,” Oly said.

The first issuer to do so appears to be Lincoln Finance, which moved its 1.25bn 6.875% and US$400m 7.375% 2021 senior secured bonds to the CISE on September 29. When the holding company bonds were issued as part of LeasePlan’s LBO in March, they were originally listed on the Luxembourg Stock Exchange.

Fiona Le Poidevin, CEO of the CISE, said the introduction of MAR was a “key driver” of the increased listings on their exchange.

“We have seen a steady stream of high-yield bond listings in the last few months, comprising a number of ‘migrations’ from both Luxembourg and Ireland in addition to new high-yield bond issues, and there are a number of further applications in the pipeline,” she told IFR.

The only two issuers looking to raise new euro high-yield bonds this week - Carlson Travel and Schustermann & Borenstein - are both planning to list the debt on the CISE, for example.

The lawyer thought only a “handful” of issuers would look to follow in the footsteps of Takko and LeasePlan by delisting existing bonds, however.

“Lots of our clients don’t want to list new bonds in the EU, but they’re still a bit sensitive about delisting,” he said.

“If there are a few more then maybe they’ll jump on the bandwagon, but I suspect people will still be more hesitant.” (Reporting by Robert Smith, editing by Helene Durand and Julian Baker)

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