Ann: WAV/RULE: AKC: AKC - Waiver from NZDX Listin

• Release Date: 10/12/12 16:34
• Summary: WAV/RULE: AKC: AKC - Waiver from NZDX Listing Rules
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AKC
10/12/2012 14:34
WAV/RULE

REL: 1434 HRS Auckland Council

WAV/RULE: AKC: AKC - Waiver from NZDX Listing Rules

5 October 2012

NZX Regulation Decision
Auckland Council
Application for Waivers from NZDX Listing Rules 5.2.3, 6.3.2 and 11.1.1

Background

1. Auckland Council ("AKC") is a Listed Issuer ("Issuer"), with bonds Quoted
on the NZDX Market.

2. AKC intends to offer new bonds ("Bonds") as part of a series of bond
offers ("Programme"). The documentation used to offer the Bonds will be
comprised of an investment statement supplemented by a series notice specific
to each issuance of Bonds (together, the "Investment Statement").

3. The terms and conditions of the Bonds will be contained in the master
trust deed, dated 27 September 2012, as supplemented by the supplemental
trust deed dated 27 September 2012, each between AKC and Trustees Executors
Limited ("Trust Deed").

4. The offer for the initial issuance of Bonds under the Programme (the
"Initial Bonds") is expected to open on 9 October 2012. It is proposed that
each issuance of Bonds under the Programme will be offered to the public and
that Quotation will be sought for any issuance that is expected to have a
reasonable public spread of security holders.

Application 1 - Waiver from Rule 5.2.3

6. AKC has approached NZX Regulation ("NZXR") seeking a waiver from NZSX /
NZDX Listing Rule ("Rule") 5.2.3 in respect of the Initial Bonds.

7. Rule 5.2.3 requires a Class of Securities to be held by at least 500
Members of the Public holding at least 25% of the number of Securities of
that Class issued, with each Member of the Public holding at least a Minimum
Holding ("Spread Requirements").

8. In support of its application, AKC submits the following:

(a) Debt securities are not generally subject to the same degree of trading
as equity securities;

(b) The offering documentation contains appropriate information regarding the
existence of the waiver and therefore potential investors are aware the
Initial Bonds are unlikely to meet the Spread Requirements;

(c) Having regard to the proposed offer timetable, it is expected that the
majority of investors will be NZX Participants and institutional investors.
However, following the completion of the offer and quotation, the Initial
Bonds will become more widely dispersed. It is expected that it may take up
to one year from the date of quotation of the Initial Bonds. Ultimately, this
will depend on Initial Bondholders' willingness to sell down their Initial
Bonds;

(d) Any lack of initial liquidity will not materially disadvantage
Bondholders because:

(i) the Initial Bonds are rated AA by Standard & Poor's and Aa2 by Moody's;
and

(ii) it is expected that a small investor may not trade the Initial Bonds,
but will hold the Initial Bonds in order to earn interest over the term of
the investment.

(e) Footnote 1 to Rule 5.2.3 states that NZX will readily consider a waiver
from the requirements of Rule 5.2.3 in the case of debt securities if NZX is
satisfied that the lack of initial liquidity would not be a disadvantage to
holders;

(f) NZXR has previously granted waivers from Rule 5.2.3 in respect of bond
offers, including in relation to bond offers by Transpower New Zealand
Limited. The waiver in that instance was subject to the following conditions:

(i) the waiver decision and its implications are clearly and prominently
disclosed in the series notice;

(ii) liquidity is disclosed as a risk in the offer document; and

(iii) the waiver, its conditions, and its effects are disclosed in the half
year and annual reports for the year that the waiver is relied upon; and

(g) AKC accepts that any waiver decision granted in its favour in respect of
Rule 5.2.3 will be subject to the conditions mentioned above.

Application One - Rule

9. Rule 5.2.3 provides:

"A Class of Securities will generally not be considered for Quotation on the
NZSX or NZDX unless those Securities are held by at least 500 Members of the
Public holding at least 25% of the number of Securities of that Class issued,
with each Member of the Public holding at least a Minimum Holding, and those
requirements are maintained, or NZX is otherwise satisfied that the Issuer
will maintain a spread of Security holders which is sufficient to ensure that
there is a sufficiently liquid market in the Class of Securities."

10. The footnote to Rule 5.2.3 provides:
 "NZX will readily consider a waiver from the requirements of Rule 5.2.3:

(a) in the case of Debt Securities or Convertible Equity Securities if NZX is
satisfied that the lack of initial liquidity would not be of a disadvantage
to holders... ."

Application One - Decision

11. Subject to paragraph 12 below, and on the basis that the information
provided by AKC is complete and accurate in all material respects, NZXR
grants AKC a waiver from Rule 5.2.3 for a period of one year from the
Quotation date of the Initial Bonds, to allow AKC to have fewer than 500
Bondholders who are Members of the Public.

12. The waiver contained in paragraph 11 is granted on the following
conditions:

(a) AKC must clearly and prominently disclose this waiver decision and its
implications in the Investment Statement for the offer of the Initial Bonds;

(b) AKC must disclose liquidity as a risk in the Investment Statement for the
offer of Initial Bonds; and

(c) the waiver, its conditions and its effects must be disclosed in the half
year and annual reports for the year that the waiver is relied upon.

Application One - Reasons

13. In coming to the decision to grant AKC a waiver from Rule 5.2.3, NZXR has
considered the following matters:

(a) AKC has advised that it expects it may take up to one year from the date
of Quotation of the Initial Bonds for the Spread Requirements to be met;

(b) It is a condition of the waiver that AKC must disclose the waiver
decision and its implications in the Investment Statement for the offer of
the Initial Bonds. AKC must also disclose liquidity as a risk in the
Investment Statement. These conditions will ensure that prospective Initial
Bondholders are aware that the Initial Bonds may not satisfy the Spread
Requirements and that, as a result, the Initial Bonds may have reduced
liquidity;

(c) debt securities are not subject to the same degree of trading activity as
equity securities; and

(d) there is precedent for temporary waivers being granted in the past in
similar circumstances.

Application Two - Waiver from Rule 6.3.2

14. AKC has also applied to NZXR seeking a waiver from Rule 6.3.2 in respect
of Bonds issued under the Programme, which deems notices posted to holders of
a Quoted Security at an address outside New Zealand to be received by that
Quoted Security holder 24 hours after the time of posting.

15. AKC wishes to include a one business day deeming provision in clause
16.1(c)(i) of the Trust Deed governing the Bonds.

16. In support of its application, AKC submits the following:

(a) The Trust Deed deeming provision affords no less notice than required by
the Rules and where there is an intervening non-business day, the position is
improved for bondholders;

(b) NZX previously granted waivers to AKC in respect of Rule 6.3.2, the most
recent of these being on 16 December 2010; and

(c) In granting that waiver, NZX noted, "bondholders are not disadvantaged by
granting the waiver as delivery is deemed to have occurred at a later date
than that provided for by the [Listing] Rules".

Application Two - Rule

17. Rule 6.3.2 provides:
"If a holder of a Quoted Security has no registered address within New
Zealand and has not supplied to the Issuer an address within New Zealand for
the giving of notices, but has supplied an address outside New Zealand, then
notices for that Quoted Security holder shall be posted to that Quoted
Security holder at such international address and shall be deemed to have
been received by that Quoted Security holder 24 hours after the time of
posting."

Application Two - Decision

18. On the basis that the information provided to NZXR is full and accurate
in all material respects, NZXR grants AKC a waiver from Rule 6.3.2, to the
extent that clause 16.1(c)(i) of the Trust Deed provides that delivery of a
notice sent to a Quoted Security holder's international address is deemed to
have occurred one business day (as that term is defined in the Trust Deed)
after the time of posting.

Application Two - Reasons

19. In granting a waiver from Rule 6.3.2, NZXR has considered that
Bondholders will not be disadvantaged by granting the waiver, as delivery is
deemed to have occurred no earlier than that provided for by the Rules. In
circumstances where there is an intervening non-business day, the waiver
provides for a higher level of protection for holders of AKC's quoted
securities than that provided for in the Rules.

Application Three - Waiver from Rule 11.1.1

20. AKC has also applied to NZXR seeking a waiver from Rule 11.1.1 in respect
of Bonds issued under the Programme, which provides that subject to any
legislation and Rules 11.1.4 and 11.1.5, no Issuer shall impose, in its
Constitution or otherwise, any restriction on the right of a holder of a
Quoted Security to transfer that Security, or any restriction upon
registration of a properly completed transfer of Quoted Securities.

21. AKC wishes to include in the Trust Deed for the Bonds terms which will:

(a) prohibit transfers if they result in the transferor or the transferee
holding less than $5,000 in Bonds (which is the Minimum Holding for the
Bonds); and

(b) require that Bonds be transferred in minimum amounts of $1,000 and
multiples thereof (together, "Transfer Restrictions").

22. In support of its application, AKC submits that:

(a) it would be burdensome for AKC to be required to allow Bondholders to
transfer parcels of less than $1,000, as this would significantly increase
compliance costs;

(b) Debt securities are generally not subject to the same degree of trading
as equity securities;

(c) The offering document contains appropriate information to inform
investors about the terms of the Bonds (in particular the restrictions on
transfers) and therefore potential investors are able to make an informed
decision on whether to invest in the Bonds; and

(d) NZXR has previously granted waivers to AKC in respect of Rule 11.1.1, the
most recent of these being 16 December 2010.

Application Three - Rules

23. Rule 11.1.1 provides:

"Subject to the provisions of any legislation, and to Rules 11.1.4 and
11.1.5, no Issuer shall impose, in its Constitution or otherwise, any
restriction on the right of a holder of a Quoted Security to transfer that
Security, or any restriction upon registration of a properly completed
transfer of Quoted Securities."

24. Rule 11.1.4 provides:

  "An Issuer may decline to accept or register:

... (b) a transfer of Securities, if such registration, together with the
registration of any further transfer or transfers then held by the Issuer and
awaiting registration, would result in the proposed transferee holding
Securities of less than the Minimum Holding."

Application Three - Decision

25. Subject to paragraph 26 below, and on the basis that the information
provided to NZXR is full and accurate in all material respects, NZXR grants
AKC a waiver from Rule 11.1.1 to allow AKC to include Transfer Restrictions
in the Trust Deed governing the Bonds prohibiting transfers that:

(a) are of an amount of Bonds that is not a multiple of $1,000; or

(b) would result in the transferor holding an aggregate principal amount of
Bonds of less than $5,000 (if not zero) following that transfer and any other
transfers awaiting registration.

26. The waiver contained in paragraph 25 above is granted on the following
conditions:

(a) the Transfer Restrictions are clearly and prominently disclosed in the
Investment Statement for the Bonds;

(b) this waiver decision and its implications are clearly and prominently
disclosed in the Investment Statement for the Bonds; and

(c) AKC only allots Bonds in multiples of $1,000.

Application Three - Reasons

27. In coming to the decision to grant AKC a waiver from Rule 11.1.1, NZXR
has considered that:

(a) NZXR will have the opportunity to review and approve the Investment
Statement relating to the Bonds so as to ensure that the level of disclosure
to prospective Bondholders of the Transfer Restrictions is sufficient that
they will be aware of the terms of the Bonds and can therefore make informed
investment decisions;

(b) The restriction will alleviate the cost and administrative burden
incurred in situations where there are many holdings of a smaller size or
there is trading of Bond holdings of less than $1,000; and

(c) There is precedent for this decision.

Confidentiality

28. AKC has requested that its application and this waiver decision be kept
confidential until the offer is announced to the market.

29. In accordance with footnote 2 to Rule 1.11.2, NZXR grants AKC's request.

ENDS.
End CA:00230920 For:AKC    Type:WAV/RULE   Time:2012-12-10 14:34:21