SECP allows listed companies to issue convertible debt through the Right offer
The Securities and Exchange Commission of Pakistan (SECP) has notified the regulatory framework for the issuance of Convertible Debt Securities (CDS) through the right offer. This new framework will allow listed companies to achieve their growth objectives by raising finance in a timely and cost-effective manner.
This regulatory framework introduces a new product and way of raising capital. It also provides detailed mechanics for the same.
Presently, convertible debt is issued either by public offering or by private placement mode. Under the said Regulations, now the listed companies can also raise funds by issuing convertible debt to existing shareholders by way of a Right offer.
It would provide an additional investment avenue for the shareholders and allow them to earn interest/profit, while also retaining the option to convert debt instruments into share capital.
Rights of CDS can also be renounced through the Securities Exchange trading platform and can also be traded in the same manner as the Letter of Right (LOR) of shares that are presently traded.
The regulatory framework has been designed in line with the disclosure-based regime being followed globally. Special focus is placed on achieving a balance between investor protection and facilitation for the issuer(s).