Australian Securities and Investments Commission
Corporations Act 2001 – Subsections 283GA(1) and 741(1) –Declaration
 
Enabling provisions
1.       The Australian Securities and Investments Commission (“ASIC”) makes this instrument under subsections 283GA(1) and 741(1) of the Corporations Act 2001 (the “Act”).
Title
2.       This instrument is ASIC Class Order [CO 10/321].
Commencement
3.       This instrument commences on the date it is registered under the Legislative Instruments Act 2003.
Note: An instrument is registered when it is recorded on the Federal Register of Legislative Instruments (FRLI) in electronic form: see Legislative Instruments Act 2003, s 4 (definition of register). The FRLI may be accessed at http://www.frli.gov.au/.
Quarterly reports for vanilla bonds
4.       Chapter 2L of the Act applies to all persons as if section 283BF were modified or varied by inserting after subsection (4):
“(4A)      If the debentures were offered under a vanilla bonds prospectus (as defined in subsection 713(9)), the report does not have to include details of:
(a)     circumstances under subparagraph (4)(c)(i) unless they prejudice the borrower or any of the guarantors; or
(b)     a change to a subsidiary’s business under paragraph (4)(d) unless the change is also a substantial change in the nature of the business of the borrower or any of the guarantors.”.
 
Declaration—Vanilla bonds prospectus and two-part prospectus
5.       Chapter 6D of the Act applies to all persons as if Part 6D.2 were modified or varied as follows:
(a)     in subsection 711(6) after the words “after the date of the prospectus.” insert “unless the prospectus is a two-part prospectus (as defined in subsection 719(6)).”;
(b)     after subsection 711(6) insert:
“(6A)   The expiry date for a two-part prospectus (as defined in subsection 719(6)) must not be later than the first to occur of:  
(a)     13 months after the date of the second part prospectus (as defined in subsection 719(6)); and
(b)     2 years after the date of the base prospectus (as defined in subsection 719(6)).”;
(c)     after subsection 711(8) insert:
“(9)      In the case of a two-part prospectus (as defined in subsection 719(6)), at the beginning of each part of the two-part prospectus, there must be prominent statements:
(a)     identifying it as the base or second part (as the case may be) of a two-part prospectus; and
(b)     that it must be read in conjunction with the current second part prospectus or base prospectus (as the case may be) and explain why this is necessary.”;
(d)     after subsection 713(1) insert:
“(1A)   A prospectus for an offer of vanilla bonds of a body satisfies section 710 if it complies with subsections (2), (3), (4) and (7) of this section.
(1B)     Subsection (1A) applies to an offer of a body’s vanilla bonds only if:
(a)  the body has continuously quoted securities on issue;
(b)  trading in the body’s continuously quoted securities on a prescribed financial market on which they are quoted was not suspended for more than a total of 5 days during the shorter of the following periods:
(i)        the period during which the class of securities was quoted; and
(ii)       the period of 12 months before the day on which the offer of vanilla bonds is made;
(c)   a determination under subsection 708AA(3), 708A(2), 713(6), 1012DAA(3), 1012DA(2) or 1013FA(3) is not in force in relation to the body;
(d)   the auditor’s reports on:
(i)    the annual financial report most recently lodged with ASIC by the body; and
(ii)   any half-year financial report lodged with ASIC by the body after the lodgment of that annual financial report and before the lodgment of the copy of the prospectus with ASIC,
are unmodified;
(e)   where the vanilla bonds prospectus:
(i)    is not a two-part prospectus—on the date of the prospectus the body has given a copy of the prospectus to the relevant market operator and published it on the body’s internet website; and
(ii)   is a two-part prospectus:
(A)    on the date of the base prospectus (as defined in subsection 719(6)), the body has given a copy of the base prospectus to the relevant market operator and published it on the body’s internet website; and
(B)    on the date of the second part prospectus (as defined in subsection 719(6)), the body has given a copy of the second part prospectus to the relevant market operator and published it on the body’s internet website; and
(f)    the body complies with subsection (8).”;
(e)     after subsection 713(6) insert:
“(7)      A vanilla bonds prospectus must also contain the information specified in sections 713A and 713B.
(8)       A body that offers vanilla bonds under a vanilla bond prospectus must ensure that the trust deed required to be entered into by the body under section 283AA in relation to the offer requires the body:
(a)  to update the key financial disclosures in respect of each financial year and each half-year during the term of the vanilla bonds;
(b)  to publish the updated key financial disclosures in respect of a financial year or a half-year on the body’s internet website and give them to the relevant market operator no later than the day it is required to lodge its annual financial report for the financial year or its half-year financial report for the half-year with ASIC; and
(c)  to:
(i)             publish on the body’s internet website; and
(ii)           give to the relevant market operator,
no later than the day the body is required to give quarterly reports to the trustee under paragraph 283BF(1)(a), reports in relation to vanilla bonds that contain the information included in a quarterly report under section 283BF, provided that the reports need only include information referred to in paragraph 283BF(4)(a) and subparagraph 283BF(4)(b)(iii) to the extent that it is material to the holders of the vanilla bonds;
Note:   The key financial disclosures in respect of a financial year or a half-year may be included in the annual financial report or the half-year financial report.
(d)  not to offer any debentures for issue to a holder of the vanilla bonds under the exemption in subsection 708(14).
(9) In this section:
key financial disclosures, in relation to vanilla bonds, means the disclosures specified in subparagraph 713A(c)(iv).
two-part prospectus has the meaning given by subsection 719(6).
vanilla bond means a debenture of a body that:
(a)  is denominated in Australian dollars;
(b)  subject to paragraph (c), has a fixed term of no more than 10 years, with the principal plus any accrued interest payable at the expiry of the term;
(c)  may provide for redemption prior to the expiry of the fixed term in some or all of the following circumstances (whether or not subject to additional conditions):
(i)             at the option of the holder of the debenture;
(ii)           as a result of the acceptance of an offer by the body to buy back the debenture;
(iii)          following a change in law or in the application or interpretation of law commencing after the date that the body issues the debenture with the effect that:
(A)         interest payable on the debenture is not, or may not, be deductible by the body for the purposes of its taxation calculation; or
(B)         the body, or any guarantor, would be required to deduct or withhold an amount in respect of taxes from a payment to the holder that, under the terms of the debenture, would result in the body, or any guarantor, being required to pay an additional amount to the holder in relation to the amount deducted or withheld;
(iv)         following a change of control of the body (as defined in the terms of the debenture), but only if all the debentures in that class are redeemed; and
(v)           if less than 10% of the debentures issued under a prospectus remain on issue, but only if all the debentures in that class are redeemed;
(d)  has a floating rate of return that comprises a reference rate plus a fixed margin or a fixed rate of return;
(e)  provides for interest to be paid periodically on the dates specified in the prospectus for the debenture;
(f)    is not subordinated under the terms of the debenture to any debt owing to unsecured creditors of the body;
(g)  is not convertible into another class of securities; and
(h)  is issued at the same price as all other debentures issued under the prospectus for the debenture.
vanilla bonds prospectus means a prospectus for an offer of vanilla bonds prepared under subsection (1A) and includes a two-part prospectus prepared for that purpose.”;
(f)      after subsection 713 insert:
“713A Contents of a vanilla bonds prospectus
A vanilla bonds prospectus (as defined in subsection 713(9)) must contain the following information:
 
(a)  a statement that ASIC has published an investor guide for retail investors who are considering investing in corporate bonds and that a copy of the guide can be obtained free of charge from ASIC’s FIDO website at www.fido.asic.gov.au/corporate-bonds or by contacting ASIC on 1300 300 630;
(b) a statement to the effect that, in addition to the information contained in the prospectus, the following information is available on the internet websites of the body and the relevant market operator:
(i)         the most recent annual financial report of the body and any subsequent half-year financial report lodged with ASIC before the lodgment of a copy of the prospectus with ASIC; and
(ii)        any continuous disclosure notices given by the body to the relevant market operator after the lodgment of that annual financial report and before the lodgment of a copy of the prospectus with ASIC;
(c)  a statement to the effect that the following information will be available on the internet websites of the body and the relevant market operator during the term of the vanilla bonds (as defined in subsection 713(9)):
(i)         continuous disclosure notices given by the body to the relevant market operator during the term of the vanilla bonds;
(ii)        annual financial reports and half-year financial reports of the body lodged with ASIC during the term of the vanilla bonds;
(iii)      quarterly reports relating to the vanilla bonds that are given by the body to the trustee and lodged with ASIC under section 283BF during the term of the vanilla bonds or quarterly reports containing material information from those reports; and
Note: The quarterly reports given to the relevant market operator and published on the body’s internet website need only include information referred to in paragraph 283BF(4)(a) and subparagraph 283BF(4)(b)(iii) to the extent that it is material to holders of vanilla bonds: see paragraph 713(8)(c).
(iv)      half-year and annual updates provided by the body that contain the following key financial disclosures, determined as at the end of each half-year and each financial year during the term of the vanilla bonds:
(A)     details of any debt ranking ahead of the vanilla bonds or that is proposed to rank ahead of the vanilla bonds in the future (for example, existing debt that is proposed to become secured, or new secured debt that is proposed to be issued in the future); and
(B)      whether the body has materially breached any loan covenants or any debt obligations (whether or not relating to the vanilla bonds) during the period covered by the report; and       
(A)     the key financial metrics for the body, as specified in section 713B;
Note:   The key financial disclosures in respect of a financial year or a half-year may be included in the annual financial report or the half-year financial report.
(d) a statement to the effect that investors who wish to receive email notification when a document referred to in paragraph (c) is made available can elect to do so by providing their email address to:
(i)         the body where indicated on the application form for the vanilla bonds; or
(ii)        the body’s securities registry;
(e)  a timetable setting out the key dates in relation to the offer;
(f)   a statement to the effect that:
(i)         the vanilla bonds have been admitted to quotation on a prescribed financial market; or
(ii)        if the vanilla bonds are not admitted to quotation on a prescribed financial market within 3 months after the date of the prospectus, they will not be issued and application money will be repaid;
Note:   If the vanilla bonds have not been admitted to quotation at the date of the prospectus, the prospectus will also need to include the statement in paragraph 711(5)(b) or (c).
(g)  the key features of the offer, including the following information:
(i)         the name of the body;
(ii)        the term and maturity date of the vanilla bonds;
(iii)      the amount sought to be raised;
(iv)      if the offer is made on or before 12 May 2012, a minimum subscription amount of at least $50 million, and a statement that if this amount is not raised, the vanilla bonds will not be issued and application money will be repaid;
(v)       the interest rate payable on the vanilla bonds;
(vi)      the interest payment dates;
(vii)    any circumstances in which the vanilla bonds can be redeemed prior to the maturity date;
(viii)   that the face value of the vanilla bonds will be repaid on the maturity date, subject to any early redemption events;
(ix)      any fees and charges payable by the holder in relation to the vanilla bonds (including any amount that will or may be deducted from a payment to be made to the holder);
(x)       general information about any significant taxation implications of holding vanilla bonds;
(xi)      whether the vanilla bonds are secured or unsecured and what this means for holders;
(xii)    the ranking of the vanilla bonds in relation to the other debt or proposed debt of the body, together with a description of what this means for holders in the event of a liquidation;
(xiii)   the amount of other debt or proposed debt that would need to be paid in priority to the vanilla bonds in the event of a liquidation;
(xiv)  whether the body may issue secured debt in the future or grant any security in relation to existing unsecured debt, the circumstances in which this may occur and what this means for holders;
(xv)    any guarantee of the body’s obligations in relation to the vanilla bonds and any significant limitations (including financial limitations) that apply to the guarantee;
(xvi)  the voting rights (if any) of holders of vanilla bonds;
(xvii) the prescribed financial market on which the vanilla bonds will be quoted; and
(xviii)        any material provisions relating to the bonds in the trust deed.
(h)  information about the significant risks of investing in the vanilla bonds, including significant risks associated with:
(i)         quoted debentures generally and with the body’s vanilla bonds in   particular; and
(ii)        the business carried on by the body that may affect the ability of the body to meet its obligations under the terms of the vanilla bonds.
(i)    information about any significant benefits to which a holder of the vanilla bonds will or may become entitled;
(j)   brief details of the business carried on by the body;
(k) a description of the financial position of the body relevant to the vanilla bond issue, including:
(i)         the purpose of the vanilla bond issue, including details of the debt profile of the body following the issue;
(ii)        the body’s capacity to meet its obligations under the vanilla bonds;
(iii)      the gearing ratio and working capital ratio for the body, as specified in section 713B, together with an explanation of what these mean for investors and how investors can use them to determine the level of risk;
(iv)      the interest cover for the body, as specified in section 713B, together with an explanation of what this means for investors and how investors can use the interest cover to assess the body’s ability to meet its interest payments;
(v)       details of whether the body has materially breached any loan covenants or debt obligations in the two years prior to the date of the prospectus or any second part prospectus (as defined in subsection 719(6));
(l)    details of how investors can apply for the vanilla bonds;
(m)        a statement that, as at the date of the prospectus and at the date of any second part prospectus, the body has complied with the provisions of Chapter 2M as they apply to the body and section 674; and
(n)  any information about the offer that:
(i)         has been excluded from a continuous disclosure notice in accordance with the listing rules of the relevant market operator to whom that notice is required to be given; and
(ii)        is information that investors and their professional advisers would reasonably require to make an informed assessment of:
(A)     the assets and liabilities, financial position and performance, profits and losses, and prospects of the body; and
(B)      the rights and liabilities attaching to the vanilla bonds.
The prospectus must contain the information referred to in paragraph (n) only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus.
 
713B Key financial metrics for a vanilla bonds prospectus
(1) This section specifies how the key financial metrics for a body offering vanilla bonds under a vanilla bonds prospectus must be determined.
(2) The gearing ratio, interest cover and working capital ratio for the body must be based on:
(a)    the body’s most recent financial statements; and
(b)   if the body prepares consolidated financial statements, the consolidated financial statements.
Note: The most recent financial statements would usually be the most recent audited or reviewed financial statements.

(3) If the body has a current prospectus for debentures:
(a)    the gearing ratio;
(b)   the net interest expense for the purposes of interest cover; and
(c)    working capital ratio,
must be calculated and disclosed both with and without the effect of the proposed issue of debentures under the prospectus.
Gearing ratio
(4)   The gearing ratio must be calculated using the following formula:
Gearing ratio
=
Total liabilities

 
 
    Total equity

 
Interest cover
(5)   Interest cover must be calculated using the following formula:
Interest cover
=
EBITDA
 
 
 
Net interest expense

where:
EBITDA means earnings before net interest expense, taxes, depreciation and amortisation.
Net interest expense means the interest expense net of interest revenue.
(6)   Net interest expense calculations must take into account any related hedging arrangements recognised in the profit and loss statements.
(7)   If the body’s most recent financial statements cover a period of less than 12 months, EBITDA and net interest expense must be calculated over that period.
Working capital ratio
(8)   The working capital ratio must be calculated using the following formula:
Working capital ratio
=
Current assets

 
 
Current liabilities”;

(g)     after subsection 719(2) insert:
“(2A)   Paragraphs (a), (b), (c) and (d) do not apply to a second part prospectus.”;
(h)     in subsection 719(4) after “ASIC,” insert the words “and has not been replaced by a second part prospectus,”;
(i)      after subsection 719(5) insert:
"(6)      In this section:
second part prospectus means a supplementary prospectus in relation to an offer of vanilla bonds (as defined in subsection 713(9)) that:
(a)     supplements a prospectus (a base prospectus);
(b)     when combined with a base prospectus contains all of the information that is required by section 713 to be contained in a vanilla bonds prospectus relating to an offer of the vanilla bonds made when the second part prospectus is lodged with ASIC; and
(c)     replaces all previous second part prospectuses (if any) that have been lodged with ASIC in relation to the base prospectus.
two-part prospectus is a base prospectus together with a second part prospectus that supplements it.”.
6.       Chapter 6D of the Act applies to all persons as if Part 6D.3 were modified or varied as follows:
(a)     in subsection 727(3) after the words “after lodgment of the disclosure document” insert the words “, or if the disclosure document is a two-part prospectus (as defined in subsection 719(6)), lodgment of the second part prospectus,”;
(b)     after subsection 727(3) insert:
“(3A)   Subsection 727(3) does not apply in relation to an offer of vanilla bonds (as defined in section 713(9)) under a vanilla bonds prospectus (as defined in section 713(9)), if the vanilla bonds are in the same class as vanilla bonds that are quoted on a prescribed financial market at the date the offer is made under the vanilla bonds prospectus, but for differences as to term, interest rate and interest payment dates.”.
 
 
 
Dated this 11th day of May 2010
 
 
 
 
Signed by Andrew Fawcett
as a delegate of the Australian Securities and Investments Commission