House of Representatives
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2014
Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)This relief is provided by ASIC Class Order 10/321.
Source: BIS Quarterly Review , December 2013.
Released in November 2009.
'High quality corporate debt' is debt issued by corporate entities that have a high credit rating and is generally considered to be lower risk than debt issued by entities with a low credit rating.
If an entity has financial difficulties, clients who had invested in simple corporate bonds would rank with unsecured creditors such as service or trade providers in being paid.
Interest cover is the amount of the entity's earnings before interest and tax exceeds any interest liability the bond issuer has to the bond holders.
The working capital ratio is the entity's current assets divided by its liabilities. The working capital ratio indicates whether a company has enough short term assets to cover its short term debt. A ratio below 1 indicates negative working capital.
A depository interest framework enables legal ownership of the underlying bond to remain with the wholesale securities depository, avoiding the need to comply with all of the regulatory obligations when a bond is issued in the retail market.
In some cases the due diligence defence under section 731 of the Corporations Act, and other defences contained in sections 732 and 733 of the Corporations Act may be available.
Bond offers commonly range from $100 million to $300 million. Some bond offers can be $1 billion or more.
That is, in the middle of the range of commonly offered bonds.
Extract from NAB testimony to the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013.
With the issuance costs depicted in Table 2.
The organisations which made submissions were the ABA, Australian Institute of Superannuation Trustees, NAB, Self-Managed Superannuation Funds Professionals Association, SMSF Owners' Association, Stockbrokers' Association of Australia and one confidential submission.
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