SEBI framework for monitoring & disclosures by debenture trustee(s) for listed debt securities
November 17, 2020
Following its guidelines for debenture trustees with respect to the creation of security and due diligence for listed debt securities, SEBI has issued a framework for monitoring and making disclosures by Debenture Trustee(s) (DTs) under the SEBI (LODR) Regulations 2015 and the SEBI (Debenture Trustees) Regulations 1993, in respect of listed debt securities. Under the said Regulations, issuers are mandated to submit information/ documents to the DTs and DTs are required to undertake independent periodical assessment of compliance with covenants or terms of issue of listed debt securities.
Periodical monitoring : DTs shall incorporate terms and conditions of the periodical monitoring in the debenture trust deed, wherein a listed entity will be liable to provide relevant documents or information to enable the DTs to submit asset cover certificate and net worth certificate of guarantor, statement of value of pledged securities, valuation report etc. to the stock exchanges within the timelines stipulated in the Circular. For existing debt securities, listed entities and DTs shall enter into supplemental or amended debenture trust deeds within 120 days from the date of this circular incorporating the changes in the debenture trust deed.
In case a listed entity has more than one DT, the debenture trustees may choose a common agency for preparation of asset cover certificate.
Breach of covenants : In case of breach of covenants or terms of the issue by a listed entity, the debenture trustee shall take steps to inform investors by way of a notice as provided in SEBI Circular dated 13 October 2020 (refer KM update dated 14 October 2020 in trail below) and then take necessary action as decided on the meeting of holders of debt securities.
Disclosures : The DTs shall disclose on their website the revision in credit ratings, status of payment of interest/ principal by the listed entity, monitoring of asset cover certificate and quarterly compliance report of the listed entity, details of debenture issues handled by DTs and their status, status of information regarding breach of covenants/terms of the issue and action taken by DT, complaints received by DTs including default cases, status regarding maintenance of accounts, status of information regarding any default by listed entity and action taken by DTs and monitoring of utilization certificate. These disclosures will be made on a continuous, quarterly or half yearly basis as stipulated, in the specified formats.
Reporting requirements : DTs shall furnish revised reports to SEBI, namely, (i) a half yearly compliance report, (ii) details of other activities carried out by them and (iii) a risk-based supervision report on a half-yearly basis, within 30 days of the end of each half year, in a specified format. The extant formats for periodical reporting prescribed by SEBI circular dated 19 December, 2011 are rescinded.
The abovementioned framework will come into force w.e.f. quarter ended December 31, 2020 for listed debt securities.
To refer to the circular dated 12 November 2020, click here.
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