Ambi To Discuss Debt Private Placement

Without any regulation or norms for private placement, Ambi sources say, some issuers have been circulating huge number of private placement forms, almost in the same number as in the public issue.

However, issuers have avoided the requirements of the prospectus by specifying that only by the person named in the covering letter could apply, thereby making it a private placement.

Sources also added that this route has become convenient for issuers because the time frame involved is less. Even companies of dubious credentials can raise monies through this route by offering substantial up-front discounts to make yields attractive.

The association is also of the view that the norms governing such placements may include meeting the requirement of adequate servicing behaviour in respect of previous debt issues without any default in timely payment of interest and principal. There should be a compulsory credit rating and only those companies above investment grade rating should be allowed to raise funds by this route from small investors.

 

The association is seeking abolition of the minimum shareholding norm. Said an Ambi source:``It will be even more difficult to comply with the requirement in case of an underwritten issue where there is devolvement on the underwriters. Existing companies will also face a problem complying with this requirement within 6 months.''

The panel will also seek from Sebi permission to allow companies to offer pure debt as their first issue of capital to the public, without requiring to get their equity listed.