Supporting access to capital for NZX listed companies

By: Hamish Macdonald, Head of External Relations And General Counsel, NZX Apr 2020

NZX response to Covid-19

The New Zealand government has confirmed that the capital markets are an essential service to New Zealand and should remain fully operational. NZX confirms it will continue to operate as an essential business supporting the capital markets community.

NZX recognises the important role for the capital markets to play at present to ensure New Zealand listed companies have access to much needed capital. It is clear that there are constraints on some issuers’ working capital positions, and we want to enable increased capacity for issuers to raise equity to support their working capital needs.

We have been leading collaborative efforts with the FMA and Takeovers Panel to introduce measures to support listed companies during these difficult times.

We have announced a lift in equity capital raising capacity to help NZX listed companies weather the impacts of Covid-19, along with measures to permit additional issuance structures and to allow greater flexibility in the timeframes for financial reporting.

Summary of relief introduced

Over the past fortnight, NZX Regulation has announced three separate sets of class waivers that offer greater flexibility to issuers in this current environment.

The first was to allow a lift in equity capital raising capacity via placements and share purchase plans.

The second was to allow greater flexibility in the timeframes for financial reporting for debt, equity and fund issuers.

And the third was to make available to the New Zealand market the Accelerated Non-Renounceable Entitlement Offer structure, and to enable downside price protection to be a feature of certain offers to retail investors given the market volatility being experienced. This allows issuers to use offer types not previously used in the NZ markets, which are particularly effective in periods of market volatility.

Through these relief packages we have removed procedural and timing requirements that might otherwise have proved a barrier or distraction to accessing much-needed capital.

Additional explanation of measures

NZX Regulation has granted the following relief under class waivers and rulings:

- The placement cap under Listing Rule 4.5.1 has been increased from 15% to 25%;
- The cap per registered holder for issues under a Share Purchase Plan has been increased from $15,000 to $50,000 and the total cap from 5% to 30% of equity securities of that class at the time of offer;
- Certain timing requirements for rights issues have been shortened, to facilitate easier and quicker pro rata offers.

These waivers and rulings have been granted until 31 October 2020. There could be an extension to the period and scope of the class waivers, if that is appropriate.

Under the class relief, issuers will be able to undertake additional equity security issuance without shareholder approval up to the revised limits. Issuers utilising the class waiver will be encouraged to recognise the interests of existing investors, for example allowing existing equity security holders the opportunity to participate to avoid dilution - in line with the policy and principles underpinning Recommendation 8.4 of the NZX Corporate Governance Code.

These capital raising measures are an extension of the body of work underway in response to Covid-19 across NZX, which includes relief from financial reporting obligations and steps to support operational resilience. Separately, we also continue to progress work to seek to make direct listings more efficient and cost-effective for listing on NZX, which could have benefits over time.

NZX appreciates the collaboration with industry groups and regulators, and will continue to work with the capital markets community in response to these challenges.