The SEC has revised the definition of Qualified Subordinated Debt to be excluded from the total liabilities for the calculation of net capital of business operators. To align the issuance of subordinated bonds with the revised definition, the SEC has amended the regulations for approval of NC bond offerings. This amendment allows business operators to issue subordinated bonds to benefit their net capital, in line with the regulations for complex and high-yield debt instruments of similar characteristics. Additionally, the SEC has proposed amendments to the process of changing the use of proceeds and the qualifications of applicants for approval of debt offerings in accordance with consistent guidelines and standards to ensure greater clarity and practicality.

The proposed regulations for issuance and offering for sale of NC bonds of business operators and the draft amendments to the use of proceeds contain the following key points:  

(1) The regulations of NC Bond offerings includes additional requirements other than those governing plain vanilla bonds. For example, all types of offerings must submit an application for approval, obtain a credit rating, disclose additional information other than plain vanilla instruments, and ensure continuous disclosure of information on net capital;  

(2) Plain vanilla instruments* must not consist of any complex features. For example, the issuer is allowed to postpone or cancel interest payments or other compensations or establish write-off criteria, etc., and excluding NC bond from the plain vanilla category; and

(3) Revising the process for amending the use of proceeds in accordance with the standard terms and conditions** and revising the criteria for considering the qualifications of bond issuers with a record of using the funds for a wrong purpose. 

The consultation paper is available at: https://www.sec.or.th/TH/Pages/PB_Detail.aspx?SECID=1015 and the legal hub at: https://law.go.th/. Stakeholders and Interested parties are welcome to submit comments and suggestions via the SEC website or email: debt@sec.or.th. The public hearing ends on 10 October 2024.      

Remark: 

* Plain vanilla instruments exclude Basel III, Insurance Capital Bond, subordinated perpetual bonds, securitized bonds and NC Bond.  

** Except in cases where a method of change has been specified otherwise in the terms and conditions of such bond series.