The Securities Investors’ Association of Singapore (SIAS), the country’s watchdog for minority shareholders, and Rajah & Tann, a leading law firm, are seeking for the Monetary of Singapore to regulate that bond issuers take up insurance when doing a new issue. Their joint proposal comes at a time of unprecedented Singapore dollar bond defaults, as seen in the offshore and marine-services industries by Nam Cheong, Ezra Holdings, Rickmers Maritime and Marco Polo Marine. Such an insurance scheme is targeted to protect bond investors in the event of a default, by having the payout from the policy go towards funding the costs of organising meetings as well as legal and financial advisory fees – which could be between S$100,000 and S$500,000 – largely borne by existing bondholders.
The other proposed reform is for issuer to allocate a minimum 30% of total issue to institutional investors. Though intentions are lofty, with the hope that in the case of a default, these institutional investors who have more financial resources and experience can take the lead in seeking a settlement with the issuers, it is questionable if such restrictions would impede the book building necessary for deals to even get done.