The Association for Financial Markets in Europe (AFME) has released best practice guidelines for non-investment grade debt issuers which, if adopted, are expected to materially improve disclosure and transparency.
The proposal recommends that issuers make key documentation for its material debt facilities and intercreditor arrangements such as agreed amendments and waivers publicly available. The documentation should be available on the issuer's public Web site, Bloomberg or other comparable public news service.
AFME also supports that offering circulars now include a description of the ranking of each material debt facility in the corporate structure; five-year maturity profile including amortization schedules; financial covenants until maturity of each underlying loan; guarantees and security clauses.
The proposal also pushes for ongoing disclosures regarding any material amendments to debt facilities, material intercompany debt arrangements and new/refinanced material debt facilities.
The proposed measures are partly a result of feedback from the European Leveraged Finance Buyside forum that has demanded greater disclosure in European high yield bond issues. The association is asking for similar information to that available to its members in the leveraged loan market. As such, this could potentially broaden the high yield bond investor base if implemented, Royal Bank of Scotland analysts said.
“Despite the slowdown in the high yield market since the second quarter of 2011, regulatory restraints and other factors including the large amount of debt that will mature and require refinancing over the next few years support our belief that the market will improve in the near to midterm,” said Gary Simmons, director of the leveraged finance division at the AFME.