Introduction

Recently SEBI has been introducing many amendments in various regulations, such as the Buy-Back regulations, Substantial Acquisition of Shares and Takeover Regulations, Delisting Regulations, etc. Amongst many such amendments, on 24th March, 2015, SEBI has now issued SEBI (Issue and Listing of Debt Securities) (Amendment) Regulations, 2015. Two sub regulations 17A and 20A has been inserted in the new regulations. Regulation 17A is regarding the Right to recall or redeem debt securities before maturity and Regulation 20A is about Consolidation and re-issuance of Debt Securities. This article will provide you an understanding of these two new sub-regulations.

Right to Recall or Redeem Debt Securities prior to Maturity

1. Subject to certain conditions, the issuer who has made a public issue of the debt securities can now,
   • recall such securities prior to maturity date at his option (call)
   • provide right of redemption prior to maturity date (put) to all the investors or only to retail investors, at their option.
2. Conditions:
   • The right to recall or redeem debt securities prior to maturity date is exercised in accordance with the terms of issue. Detailed disclosure in this regard is made in the offer document, including,
     • date from which such right is exercisable,
     • period of exercise (>= 3 working days),
     • redemption amount (including the premium or discount at which such redemption shall take place);
   • Such right with respect may be used with respect to either all the debt securities issued or held or with respect to only a part of the securities issued or held by the issuer or investor respectively;
   • In case of partial exercise of such right by the issuer, it shall be done on proportionate basis only;
   • Such right shall be exercisable only on or after expiry of 24 months from the date of issue of such debt securities;
   • Notice: The issuer shall
     • send notice to all the eligible holders of such debt securities atleast 21 days before the date from which such right is exercisable,
     • provide a copy of such notice to the stock exchange where the such debt securities are listed for wider dissemination and,
     • make an advertisement in the national daily having wide circulation indicating the details of such right and eligibility of the holders who are entitled to avail such right;
   • Payment on redemption: The issuer shall pay
     • redemption proceeds to the investors along with the interest due to the investors within 15 days from the last day within which such right can be exercised,
     • interest at the rate of 15% p.a. for the period of delay, if any;
   • After the completion of the exercise of such right, the issuer shall submit a detailed report to the stock exchange for public dissemination regarding the debt securities redeemed during the exercise period and details of redemption thereof;
3. Retail investor shall mean the holder of debt securities having face value <= Rs 2 lakh.

Consolidation and Re-issuance of Debt Securities

An issuer may carry out consolidation and re-issuance of its debt securities, subject to the following conditions:

1. There is such an enabling provision in its articles under which the issuer has been incorporated;
2. The issue is through private placement;
3. The issuer has obtained fresh credit rating for each re-issuance from at least one credit rating agency registered with the Board and is disclosed;
4. Such ratings shall be revalidated on a periodic basis and the change, if any, shall be disclosed;
5. Appropriate disclosures are made with regard to consolidation and reissuance in the Term Sheet.