A recent article in the Wall Street Journal highlights a new role that many creditors of distressed companies have taken on – leading the push for greater transparency.
Once confidential talks with distressed companies either stall or end, many creditors have been pushing the firms to disclose numerous documents and other information that was shared. This allows the creditors to trade the company’s debt without using inside information.
“The nondisclosure agreements are now much more heavily negotiated than they were in the past in order to cover the waterfront…so that the investment firms can be certain that they’re able to trade at the end of the periods,” Damian Schaible, a lawyer in Davis Polk & Wardwell LLP’s insolvency and restructuring group, told the Wall Street Journal.
Since a court ruling in 2011, many creditors have pushed for greater transparency and disclosures from corporate borrowers. The push comes for “extensive details of the negotiations right after confidentiality agreements that apply during the talks expire,” noted the Wall Street Journal. The disclosures are typically done through 8-K securities filings. Between December 1, 2012 and November 30, 2013, there were nearly 50,000 8-Ks filed by companies with annual revenue of at least $10 million. Of those, according to Morningstar Inc., the average filing was almost 21 pages and the median filing was eight pages.
Learn more about creditors and the push for increased transparency and disclosures from the Wall Street Journal.