SEC Amends Financial Disclosure Requirements for Debt Offerings

On March 2, 2020, the Securities and Exchange Commission (“SEC”) approved amendments to the financial disclosure rules that apply to registered debt offerings with credit enhancements. The SEC’s stated purpose in adopting the amendments is to improve disclosure quality and to encourage companies to conduct registered debt offerings instead of private debt offerings. These amendments follow the trend of the SEC simplifying disclosure requirements for issuers while continuing to emphasize the importance of investor protection. 

These rules apply to (1) issuers of guaranteed securities; (2) guarantors of guaranteed securities; and (3) affiliates whose securities collateralize the securities being registered. The requirements impact disclosure made in connection with registering the debt securities as well as ongoing periodic reporting.

The amendments eliminate some compliance burdens for issuers, including by allowing summarized financial information, reducing the number of periods presented in financial information, and allowing this information to be presented outside of the financial statement footnotes. The SEC believes this relief for issuers, which is intended to decrease the costs of raising capital, coupled with the protections for investors present in a registered offering, will make registering debt offerings with credit enhancements more attractive to issuers and investors alike.

These amendments, which will comprise a new Article 13 of Regulation S-X, will be effective January 4, 2021. Companies may voluntarily comply with these rules in advance of that date. The SEC’s final rule is available here.

If you have any questions about this LEGALcurrents®, please contact a member of our Securities and Capital Markets practice group or call 716.853.1616 or 585.232.6500.

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