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THE Singapore Exchange (SGX) has unveiled measures to smooth the way for firms which are dragging their feet to qualify for its revamped second board Catalist by a deadline next February.
First, the bourse operator has arranged loans to help companies pay for sponsors, which are a key element of the changes to the former Sesdaq board.
A total of 76 companies, or about half of Catalist's 154 companies, have yet to appoint a sponsor.
These SGX-approved sponsors, which include leading banks, usher companies through the listing process, then mentor them as they expand their business.
And second, the SGX is giving firms the option of a later Dec 31, 2010 deadline, instead of the Feb 5 deadline.
Those without a sponsor after the Feb5 deadline will have their shares suspended until they engage a sponsor or seek a transfer to the mainboard. Those without a sponsor after Dec 31 will be delisted.
Catalist is designed for smaller companies with strong growth potential. The changes brought in with the shift to Catalist are intended to help these businesses along the path to expansion.
The SGX has roped in Hong Leong Finance to provide the loans under the scheme, which will evaluate the company's credit standing before granting the loan.
The SGX said yesterday that the measures serve to provide financial assistance and time relief to Catalist non-sponsored companies in view of the prevailing economic conditions.
Catalist companies without a sponsor can each obtain a one-time loan of up to $50,000 for fees payable to its Catalist sponsor. The loan will be for a two-year period and will be paid to the sponsor.
The SGX will also support the scheme by providing a guarantee to cover 90 per cent of each loan, subject to a total loan amount of $5 million under the scheme.
That means that borrowers do not have to pledge any other security or provide any other guarantee in order to secure the loan.
The scheme is open to all Catalist companies without a sponsor, as well as those which have already engaged one.
The SGX said that, based on the latest progress reports given by the 76 companies which have yet to appoint a sponsor, 66 of them have indicated their intention to do so before the Feb 5 deadline.
Another six 'have indicated their intention to transfer to the SGX mainboard or pursue a restructuring exercise to maintain listing', it said.
This leaves four companies, of which one is in financial difficulty, that have yet to make their intentions clear.
Some companies have been dragging their feet about getting a sponsor, preferring to wait until the Feb 5 deadline approaches, because they will have to start paying sponsor fees once they switch.
It costs anywhere from $80,000 to $200,000 a year in sponsor fees.
'It is just business sense' to wait until the deadline draws near, said Mr William Lim, chief executive of Old Chang Kee. The company is currently in talks with a few sponsors and will be appointing one in September.
It takes about three to four months for due diligence work, so working backwards from the deadline, companies could start appointing sponsors towards the end of the year, he said.
'For some overstretched companies, it will be useful to have such loans available... But the interest rate does seem pretty high compared with what we could get outside,' added Mr Lim.
The loan comes with 6.5 per cent interest a year with a repayment period of two years or on demand.
Mr Tony Tan, chairman and chief executive of Soon Lian, an aluminium alloy products specialist, welcomed the move.
However, he said: 'The majority of the companies on the second board should be able to afford the sponsor fees without resorting to borrowing.
'I don't think the majority of companies will want to choose to delist after coming such a long way. The majority will still move to what the SGX wants us to do - look for a sponsor or transfer to the mainboard.'
SGX senior vice-president and Catalist head Ong Chong Jin said: 'We are aware that companies are facing a challenging business environment and short-term financing constraints.'
He added that the pool of 19 approved sponsors is 'sufficient' for now.
Mr Lawrence Wong, SGX executive vice-president and head of listings, said the measures 'aim to strike a balance between the development of Catalist and the interests of its various stakeholders, including the need of shareholders for certainty on the continuing listing of companies they have invested in'.
Applications for the loan will start on Aug 3 and end on Oct 30, with the loan drawdown no later than Dec 31.
New measures to aid transition
Companies without a sponsor after the Feb 5 deadline will see their shares being suspended until they engage a sponsor or seek a transfer to the mainboard. Those without a sponsor after Dec 31 will be delisted.
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