Ann: WAV/RULE: TRP: Application: Ruling & Waivers

• Release Date: 29/02/12 10:34
• Summary: WAV/RULE: TRP: Application: Ruling & Waivers from NZDX Listing Rules (TRP)
• Price Sensitive: No
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TRP
29/02/2012 08:34
WAV/RULE

REL: 0834 HRS Transpower New Zealand Limited

WAV/RULE: TRP: Application: Ruling & Waivers from NZDX Listing Rules (TRP)

28 February 2012

NZX Market Supervision Decision
Transpower New Zealand Limited
 Application for Ruling and Waivers from NZDX Listing Rules

Background

1. Transpower New Zealand Limited ("TRP") has applied for listing and
Quotation of fixed rate bonds on the NZDX.
2. Prior to becoming an Issuer, TRP made offers of, and allotted,
$125,000,000 fixed rate bonds ("the Bonds") pursuant to a registered
prospectus ("Prospectus"), an investment statement ("TRP Investment
Statement") and a pricing supplement ("Pricing Supplement") dated 17 November
2011.
3. The offer period in respect of the Bonds closed on 25 November 2011 and
the Bonds were allotted on 30 November 2011.
4. The terms and conditions of the Bonds are contained in the master trust
deed between TRP and The New Zealand Guardian Trust Company Limited
("Trustee"), dated 18 March 2011, as amended and restated on 1 November 2011,
and the supplemental trust deed in relation to the Bonds dated 17 November
2011 between TRP and the Trustee ("Trust Deed").
5. Subsequent to the close of the offer period and allotment of the Bonds,
TRP applied to NZX Market Supervision ("NZXMS") to become an NZDX listed
Issuer and to Quote the Bonds on the NZDX.
Application One - Ruling

6. TRP has approached NZXMS seeking a ruling that, for the purposes of the
NZSX/NZDX Listing Rules ("Rules"), the Offering Document in respect of the
Bonds is to constitute the TRP Investment Statement as supplemented by the
Pricing Supplement and an additional listing disclosures document
("Additional Listing Disclosures Document").
7. Pursuant to the Rules, the Offering Document in respect of the Bonds
should be an Investment Statement. However, as the TRP Investment Statement
was prepared before TRP became a listed Issuer, and therefore before it
became subject to the Rules, it does not include a number of the Rule
requirements relating to Offering Documents.
8. TRP wishes to meet the requirements of the Rules by including the
additional information required by the Rules, which is not contained in the
TRP Investment Statement and the Pricing Supplement in an Additional Listing
Disclosures Document.
9. In support of its application, TRP submits that:
(a) the Additional Listing Disclosures Document will contain additional
information required by the Rules, which is not contained in the TRP
Investment Statement or the Pricing Supplement. This will ensure that both
existing Bondholders and anyone wishing to trade the Bonds, as well as the
market, are provided with all relevant information in respect of the Bonds;

(b) given that the TRP Investment Statement and the Pricing Supplement have
already been published, unnecessary costs would be incurred if the TRP
Investment Statement and the Pricing Supplement had to be amended;

(c) as the Pricing Supplement is a schedule to the Trust Deed, the process
set out in the Trust Deed would need to be followed in order to amend the
Pricing Supplement; and

(d) TRP will make an announcement to the effect that the Offering Document is
the TRP Investment Statement, Pricing Supplement and the Additional Listing
Disclosures Document and ensure that those documents are contemporaneously
released to the market.

Application One - Decision
10. On the basis that the information provided by TRP to NZXMS is complete
and accurate in all material respects, NZXMS rules that, for the purposes of
the Rules, the Offering Document in respect of the Bonds shall be the TRP
Investment Statement as supplemented by the Pricing Supplement and the
Additional Listing Disclosures Document.
Application One - Reasons
11. In coming to the decision to rule that the Offering Document for the
Bonds shall be the TRP Investment Statement as supplemented by the Pricing
Supplement and the Additional Listing Disclosures Document, NZXMS has
considered the following matters:

(a) such a ruling allows TRP to meet the requirements of the Rules without
having to amend the TRP Investment Statement and Pricing Supplement and incur
the unnecessary compliance costs associated with such amendments;

(b) NZXMS will have the opportunity to review and approve each of the TRP
Investment Statement, the Pricing Supplement and the Additional Listing
Disclosures Document; and

(c) it will be apparent to the market that the Investment Statement, Pricing
Supplement and the Additional Listing Disclosures Document are the Offering
Document as they will be announced together and TRP will issue a clarifying
statement.

Application Two - Waiver from Rules 7.1.5(b), 7.1.8, 7.1.10 and 7.1.12

12. TRP has also applied to NZXMS seeking waivers from Rules 7.1.5(b), 7.1.8,
7.1.10 and 7.1.12 on the basis that they are not applicable in the context of
a compliance listing where the offer period in respect of the Bonds has
closed, and the Bonds have been allotted, prior to TRP becoming a listed
Issuer and the Bonds being Quoted on the NZDX market.

Application Two - Rules

13. Rule 7.1.5(b) provides:

"Every Offering Document shall contain:
...
(b) if applicable, a timetable of all relevant dates for:

(i) opening and closing of the offer; and
(ii) allotment, Quotation and trading of the Securities offered and/or Rights
to those Securities; and
(iii) the payment of initial dividends, interest or other benefits under the
Securities;... ."

14. Rule 7.1.8 provides:

"Every Offering Document shall state the number and percentage of Securities
of any Class which have been reserved for any class of applicant or are
otherwise not available for application by Members of the Public, including
Securities which are not part of the issue or are not offered under the
Offering Document, and the names or description of any class of persons to
whom any preference in allotment is to be given. NZX may in any particular
case require the inclusion of a statement to this effect in any
Advertisement."

15. Rule 7.1.10 provides:

"Every Offering Document, after stating that applications may be made to the
Issuer, shall state that they may be lodged with any Primary Market
Participant, the Organising Participant or any other channel approved by NZX
(in that order) in time to enable forwarding to the appropriate place prior
to the application closing date."

16. Rule 7.1.12 provides:

"Every Offering Document shall state the method of dealing with
over-subscriptions, and the maximum amount of over-subscriptions which will
be accepted."

Application Two - Decision
17. Subject to paragraphs 18 and 19 below, and on the basis that the
information provided by TRP is complete and accurate in all material
respects, NZXMS grants TRP a waiver from Rules 7.1.5(b), 7.1.8, 7.1.10 and
7.1.12.

18. The waivers contained in paragraph 17 above are granted on the condition
that TRP clearly and prominently disclose the waivers in the Additional
Listing Disclosures Document for the Bonds, and that NZXMS have the
opportunity to review and approve the Additional Listing Disclosures
Document.

19. The waiver granted in respect of Rule 7.1.10 is granted on the further
condition that TRP include a statement in the Additional Listing Disclosures
Document that if holders of the Bonds wish to trade their Bonds they should
contact a Primary Market Participant, Organising Participant or other channel
approved by NZX.

Application Two - Reasons
20. In coming to the decision to grant TRP a waiver from Rules 7.1.5(b),
7.1.8, 7.1.10 and 7.1.12, NZXMS has considered that:

(a) these Rules are not applicable in the context of a compliance listing
where the offer period in respect of the Bonds has closed, and the Bonds have
been allotted, prior to TRP becoming a listed Issuer and the Bonds being
Quoted on the NZDX. Accordingly, requiring TRP to include the information
required by Rules 7.1.5(b), 7.1.8, 7.1.10 and 7.1.12 in its Offering Document
would be likely to cause confusion to existing Bondholders and the market;
and

(b) the condition set out in paragraph 19 in respect of the waiver from Rule
7.1.10 will ensure that Bondholders are aware that, if they wish to trade
their Bonds, they will need to do so through a Primary Market Participant,
Organising Participant or other channel approved by NZX.

Application Three - Waiver from Rule 5.2.3

21. TRP has also applied to NZXMS seeking a waiver from Rule 5.2.3, which
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").
22. In support of its application, TRP submits that:

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

(b) in respect of debt instruments, it is the quality of the issuer and the
rate of return which fundamentally drives price;

(c) there are currently 103 holders of the Bonds. The Bonds have been
allotted to brokers (as well as institutional investors), and it is therefore
anticipated that the liquidity requirements of Rule 5.2.3 will be met over
time, particularly once TRP is listed and the Bonds are Quoted;

(d) TRP expects that it will take approximately one year from the date of
Quotation of the Bonds for the Spread Requirements to be met;

(e) any lack of initial liquidity will not disadvantage Bondholders because:

(i) the Bonds are currently rated AA- by Standard & Poor's and A1 Moody's;
and

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

(f) 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 of a disadvantage
to holders.

Application Three - Rule

23. 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."

24. 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 Three - Decision
25. Subject to paragraph 26 below, and on the basis that the information
provided by TRP is complete and accurate in all material respects, NZXMS
grants TRP a waiver from Rule 5.2.3 for a period of one year from the
Quotation date of the Bonds, to allow TRP to have fewer than 500 Bondholders
who are Members of the Public.
26. The waiver contained in paragraph 25 is granted on the condition that TRP
clearly and prominently disclose this waiver decision and its implications in
the Additional Listing Disclosures Document for the Bonds.

Application Three - Reasons
27. In coming to the decision to grant TRP a waiver from Rule 5.2.3, NZXMS
has considered the following matters:

(a) TRP has advised that it expects the Bonds to meet the Spread Requirements
in a period of approximately one year from the Quotation date of the Bonds;

(b) the condition, contained in paragraph 26 above, that TRP must disclose
the waiver decision and its implications in the Additional Listing
Disclosures Document will ensure that both existing Bondholders and those
wishing to trade the Bonds are aware of the current spread of the Bonds;

(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 Four - Waiver from Rule 11.1.1

28. TRP has also applied to NZXMS seeking a waiver from Rule 11.1.1, 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.
29. The terms of the Bonds:
(a) prohibit transfers if they result in the transferor or the transferee
holding less than $5,000 (if not zero) in principal amount in the 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, the "Transfer Restrictions").

30. In support of its application, TRP submits that:

(a) it would be unduly burdensome for TRP to be required to allow holders of
Bonds to hold a parcel of less than the Minimum Holding or to permit
transfers of less than $1,000 or multiples thereof as this is likely to
increase its compliance costs;

(b) minimum transfers of $1,000 is a commonly used threshold across all debt
securities;

(c) the minimum amount of the Bonds that could be subscribed for by investors
pursuant to the TRP Investment Statement was $5,000 and TRP has only allotted
further Bonds in multiples of $1,000;

(d) the Transfer Restrictions (as set out in paragraph 29 above) will not
have an adverse effect on holders of the Bonds; and

(e) NZXMS has previously granted waivers from Rule 11.1.1 in respect of
issues of debt securities. For example, to: Fonterra Co-operative Group
Limited on 17 March 2010 and Auckland International Airport Limited on 8
October 2008.

Application Four - Rules

31. 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."

32. 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 Four - Decision

33. Subject to paragraph 34 below, and on the basis that the information
provided to NZXMS is full and accurate in all material respects, NZXMS grants
TRP a waiver from Rule 11.1.1 to allow it to include the Transfer
Restrictions in the terms of 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.

34. The waiver contained in paragraph 33 above is granted on the condition
that TRP clearly and prominently disclose the Transfer Restrictions, this
waiver decision and its implications, in the Additional Listing Disclosures
Document for the Bonds.

Application Four - Reasons

35. In coming to the decision to grant a waiver from Rule 11.1.1, NZXMS has
considered that:

(a) The offer period for the Bonds has already closed and, pursuant to the
TRP Investment Statement, the minimum amount of Bonds that could be
subscribed for by investors was $5,000 and TRP has only allotted further
Bonds in multiples of $1,000;

(b) NZXMS will have the opportunity to review and approve the Additional
Listing Disclosures Document relating to the Bonds so as to ensure that the
level of disclosure to prospective holders of the Transfer Restrictions is
sufficient that they will be aware of the terms of the Bonds and can
therefore make informed investment decisions;

(c) 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

(d) There is precedent for this decision.

Confidentiality

36. TRP has requested that NZX keep this ruling and waivers confidential
until the Bonds are Quoted.

37. In accordance with Footnote 1 to NZDX Listing Rule 1.11.2, NZXMS grants
TRP's request.

ENDS.
End CA:00220149 For:TRP    Type:WAV/RULE   Time:2012-02-29 08:34:17