The Refinancing Disclosure Trap... And How To Avoid It

Key Point

• Directors of a listed entity need to ensure that, when faced with a spectrum of challenging issues, including the actual solvency and financial viability of an organisation, disclosure obligations are not overlooked.

Market disclosure of debt positions is now a major issue for many listed entities.

As the economic downturn leads to the withdrawal of capital from underperforming sectors, debt refinancing risk has resulted in significant devaluations of many leveraged entities. With monotonous regularity this devaluation has then resulted in those entities' being unable to raise capital through the equities market without further deep discounting. Market disclosure of an entity's debt position has therefore become the subject of intense scrutiny by analysts and investors and, in some cases, the target of shareholder class actions.