Legislation paves way for corporate bond offerings

The Finance Ministry said yesterday it has finalized draft legislation allowing companies to issue corporate bonds while two other separate bills will beef up the powers of the Capital Market Commission and tighten the corporate accounting framework. Plans to open up an alternative source of funding for companies finding it difficult to raise capital from the sluggish stock market were first unveiled in November. Economy and Finance Minister Nikos Christodoulakis yesterday met with Bank of Greece officials, industrialists and representatives from the securities regulator and the stock market to work out the final details. The proposed bill, shortly to be tabled in Parliament, sets out the framework for corporate bond offerings and securitization operations for companies. While securitization has been a favored government method of raising funds in recent years, it remains unknown territory for Greek businesses, with only a few having taken the risk to date. Under the proposed legislation, companies will be able to issue ordinary corporate bonds, exchangeable bonds, convertible bonds and bonds in which shareholders receive a share of the profits. Receivable-backed securitization operations will have to be handled by a special-purpose vehicle which will be monitored by the Bank of Greece. Securitization underpinned by corporate real estate will only be open to institutional investors. A separate bill reinforcing the Capital Market Commission will see the State and the Athens Stock Exchange ceding their regulatory and licencing powers to the watchdog, paving the way for the transformation of the bourse into a private-sector company. The commission in turn will seek to simplify and speed up listing procedures. Audited accounts of the last few years will be mandatory for companies planning a market flotation. The proposed legislation on accounting requirements, triggered by the corporate accounting scandals in the US last year, called for the setting-up of an independent supervisory committee to standardize accounting rules. It also bars auditors from providing both auditing and consultancy services to the same clients. Auditors who perjure themselves could face sanctions. The government’s attempts to strengthen the stock market and improve transparency and corporate governance came as more and more domestic investors lost interest in the equity market. Domestic investors made up 71.35 percent of total investors at the ASE at the end of 2002, down from 72.34 percent at the end of September, the bourse said yesterday. The total value of their portfolio amounted to 46.92 billion euros against 49.95 billion euros on September 30, 2002. Foreign investors accounted for 28.7 percent of the total at the end of 2002, holding stocks valued at 18.84 billion euros.

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