ASX provides an efficient, transparent market for debt securities using the ASX trading and settlement mechanisms. Companies and other entities choose to raise debt finance by quoting debt securities on the ASX market to take advantage of:
1. Funding diversity
- In a world where funding diversity is almost as critical as the interest cost of debt raised, issuing debt securities for quotation on ASX can diversify the issuer’s funding exposure away from bank lending and/or offshore markets.
2. Reduced costs and prospectus requirements
- With changes to prospectus requirements and technology advances, many of the previous costs associated with an issue of debt securities have been significantly reduced.
- New legislation is due to go before Parliament, setting out a simplified two part disclosure document for listed, high-quality "simple corporate bonds". While this legislation is in process, ASIC has extended its class order relief for “vanilla bonds” (which have similar features to "simple corporate bonds") with a minimum subscription of $50 million. This relief is now due to expire 12 November 2013.
3. Liquidity and term flexibility
- Debt securities listed on ASX are accessible to all investors, which can greatly increase the potential market for an issuer’s securities;
- Having alternatives to more traditional funding sources provides greater flexibility for issuers to match their borrowing requirements with investor demand;
4. Investors seeking longer term debt whilst still retaining flexibility
- Many retail investors have a longer investment horizon than that offered by bank term deposits but still want the flexibility of being able to liquidate their investment. With an aging population and expanding pool of self-managed super, the demand from investors for attractive long term interest rate securities is expected to only grow.
These factors, combined with ASX’s efficient and cost effective trading and settlement system, provide a viable funding alternative for borrowers looking to raise term debt.