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Thursday, 28th March 2024
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The ISE: an international player in the debt listings market back

Since it first produced specialist listing rules for debt securities the Irish Stock Exchange (ISE) has gone from strength to strength in this sector. Joanne McEnteggart outlines the astonishing success the ISE has enjoyed in this area and outlines reasons for future gowth, such as the advent of the Prospectus Directive and the flow of more sophisticated deals with synthetic assets backing the transactions.
Since 1989, the Irish Stock Exchange (ISE) has gained an international profile much greater that its size would ordinarily justify. With the launch of the International Financial Services Centre (IFSC), it took the decision to admit Irish domiciled funds to listing. As the years have passed, the ISE has gained publicity for its decision to admit non-Irish funds, for the initiative it took in developing special rules for hedge funds and for its continual willingness to review its listing rules to ensure that it maintained a level of supervision which was appropriate to the products seeking a listing.

It was in keeping with this culture of innovation that in 1999, the ISE first produced specialist listing rules for debt securities. The rest is history. The story of debt listing on the ISE has been one of great success and exceptional growth. The ISE's highly transparent and user friendly regime has contributed to and supported the securitisation industry both domestically and internationally. In 2000, 82 debt securities were listed on the ISE. By 2006, this number had reached 2,595, approximately 400 of these issuers listed with programme documents whilst the remainder are issuers of standalone transactions. New listings during 2006 alone increased 49 per cent from the previous year.

In 2005, the EU Prospectus Directive was transposed into Irish law to harmonise listing requirements across Europe. To date, the ISE is regarded as the foremost European stock exchange to list debt securities due to its commercial and consistent approach and competitive timing.

Pursuant to the listing rules, every structure must appoint a listing agent who is responsible for ensuring compliance with the ISE guidelines and any relevant EU securities legislation. NCB provides the services of a listing agent to issuers of securitisations seeking a listing on the ISE. Since 1989, NCB has acted as a sponsoring broker and listing agent with the longest track record in this industry. We have very broad experience in all listing issues and structures from programmes to standalone CDO, CLO, CMBS and RMBS transactions. We provide a highly personalised service with a dedicated team of professionals. We are competitive, committed to timing with a pro-active approach.

Whilst the implementation of the Prospectus Directive brought about some minor changes to the listing process, the main difference since then has been the change to our client base. We have seen a growth in European issuers choosing to list on the ISE, mainly from Germany, the Netherlands and Italy. The majority of deals coming from Europe are for the main part either commercial mortgage backed securities or collateral debt obligations. The advisors for such issuers choose the location on the basis of the efficient and commercial approach taken in the interpretation of guidelines from the Prospectus Directive. In such instances, once approval is granted from the Irish Financial Services Regulatory Authority (IFSRA), the European issuers passport their prospectus back to their country of incorporation. Under the Prospectus Directive once a prospectus is approved in a member state, it must be accepted throughout the EU for public offers and/or admission to trading on regulated markets.

This passporting option may also account for the significant growth in the establishment of Irish domiciled special purpose vehicles, which can avail of the opportunity to sell to investors throughout the rest of Europe. The Irish securitisation vehicle is the vehicle of choice for legal advisors throughout the world with responsibility for structuring such transactions. This year, we have seen many major US re-insurance companies choosing Ireland as the location to structure deals which are securitising a flow of re-insurance agreements. Such issuers have also selected the ISE as the exchange of choice - presumably seeing the potential of opening the floodgates to European investors.

Notwithstanding the advantage of passporting, access to institutional investors is still widely seen as the main benefit of listing. In most instances, such investors are restricted to investing in products listed on a recognised, regulated EU stock exchange. In this regard, listing on a long-established, well regulated facility such as the ISE, provides a valuable marketing tool.

In terms of recent trends, whilst asset backed securities still represent a significant portion of the deals we list, as with the ISE, we are seeing more sophisticated deals with synthetic assets backing the transactions. In relation to such synthetic deals, the main disclosure issue is in relation to the counterparty to the synthetic arrangement. We have also witnessed a number of transactions which were more hybrid in nature than previously experienced - structured in an attempt to appeal to the large hedge fund manager base, that is, funds that are issuing debt and debt products which are backed by equity. We have also seen a significant interest in the listing of debt products with frequent tap issuances. The use and listing of programmes remains a strong favourite for Irish and UK issuers.

We believe the ISE, aware of their strong position in the market, are extremely focused on maintaining their dominance. When asked by a large arranger whether I felt that the ISE's model was sustainable, I answered with conviction that the ISE, having built a significant support network around providing this product were resolute on continuing to provide an effective, efficient and timely commitment to processing applications and the listing regime. NCB is also delighted by the appointment of Ms. Deirdre Somers as chief executive of the ISE and we believe this will further strengthen the ISE's position in the market.
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