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Publication
Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United States | Publication | May 27, 2020
This publication was produced by
Norton Rose Fulbright and
Piper Sandler & Co.
Due to the extraordinary nature of the impact of COVID-19 on senior living providers, investors in public debt are looking for insight into how individual senior living borrowers are coping with the pandemic. Recently, the US SEC Chairman issued a public statement that emphasizes the importance of providing voluntary disclosure to investors in light of the pandemic. Accordingly, senior living providers with outstanding public debt should consider providing bond investors with voluntary disclosures on the impact of COVID-19 on their operations and financial position. This communication provides an overview of possible approaches for voluntary communications with investors related to COVID-19’s impact on borrowers.
Securities and Exchange Commission (SEC) Rule 15c2-12 requires borrowers to provide annual public disclosure of certain financial information and operating data, and prompt disclosure of key events to the Municipal Securities Rulemaking Board (MSRB) through the MSRB’s Electronic Municipal Market Access (EMMA) website. Posting of voluntary notices (beyond required event notices) on EMMA is also permitted when borrowers/obligated persons determine it is appropriate. Whether required or voluntary, documents posted on EMMA are subject to the antifraud provisions of federal securities laws, so they may not misstate or misleadingly omit a material fact. Consequently, borrowers are typically cautious about voluntary disclosures that include forward-looking statements due to the potential application of federal antifraud rules to such disclosures, and the general concern that the accuracy of forward-looking statements may be second guessed by regulators or plaintiffs’ lawyers after the fact. (An overview of the Rule is available on the MSRB’s website).
Borrowers should consult with legal counsel before providing COVID-19 disclosure
On May 4, the Chairman of the SEC and the Director of the Office of Municipal Securities issued a public statement titled “The Importance of Disclosure for our Municipal Markets” (the Municipal Public Statement) that encouraged municipal market issuers and borrowers to consider providing voluntary disclosure regarding the current and reasonably anticipated future impacts of COVID-19 on financial and operating conditions. Providing some comfort regarding the SEC officials’ view on forward-looking statements in light of the COVID-19 pandemic, the Municipal Public Statement noted “[the SEC officials] would not expect good faith attempts to provide appropriately framed current and/or forward-looking information to be second guessed by the SEC.” However, the Municipal Public Statement noted that certain “safe harbors” for forward-looking statements that are available to registered corporate issuers are not available to municipal issuers and borrowers, and municipal issuers and borrowers must instead rely on protections developed through judicial rulings. The Municipal Public Statement was clear that borrowers should be cautious and consider consulting their legal counsel prior to providing any forward-looking statements to investors.
The Municipal Public Statement provided examples of the information that the SEC officials believed are important to provide to investors relating to COVID-19, as described in the chart below and expanded on for topics relevant to senior living borrowers.
(The Municipal Public Statement is available at sec.gov/news/public-statement/statement-clayton-olsen)
Disclosure should not obligate the borrower to provide future voluntary filings and certain statements should be considered “forward-looking”
Any voluntary disclosure provided by a senior living borrower should be clear that the disclosure is provided only as of a certain date and that the disclosure does not obligate the borrower to provide future voluntary filings. Forward-looking statements, if included, should be made in good faith, based on reasonable assumptions, and accompanied by a brief description of substantial risks that could prevent forecasted results from being realized, including risks disclosed in related offering documents. While municipal issuers and borrowers do not have the benefit of statutory safe-harbors available to corporate issuers for forward-looking statements, the case law “bespeaks caution” doctrine is to a similar effect.
Below are some ways that borrowers may consider communicating with investors:
One option that may be attractive to many borrowers that do not have scheduled reports in the near future is to provide an initial “off-cycle” voluntary disclosure submission and then include voluntary updates with the borrower’s normal continuing disclosure filings, as warranted.
The last few months have been unique and difficult for senior living borrowers. As the crisis related to the COVID-19 pandemic continues, bond investors will place a high value on additional disclosures from borrowers with regards to the impact of COVID-19 in order to make informed investment and trading decisions. Borrowers can generate goodwill with investors during these uncertain times and into the future by providing transparency through voluntary COVID-19 disclosures. Any disclosure strategy should be discussed with legal and capital markets professionals to ensure compliance with securities laws and that the most appropriate information is provided to the investor community.
Rick Lohr
Piper Sandler & Co.
Head Of Senior Living
Houston
T: 281 907-4918
E: richard.lohr@psc.com
Jeff Fivecoat
Piper Sandler & Co.
Managing Director
Columbus
T: 614 889-8401
E: jeffrey.fivecoat@psc.com
Amy Hayman
Piper Sandler & Co.
Managing Director
Chicago
T: 312 267-5058
E: amy.hayman@psc.com
Romy McCarthy
Piper Sandler & Co.
Managing Director
Milwaukee
T: 414 847-6373
E: romy.mccarthy@psc.com
Marc Silver
Piper Sandler & Co.
Managing Director
Albany
T: 518 242-7818
E: marc.silver@psc.com
Matt Weaver
Piper Sandler & Co.
Managing Director
Jacksonville
T: 904 381-9844
E: matthew.weaver@psc.com
Brad Wirt
Piper Sandler & Co.
Managing Director
Minneapolis
T: 612 303-6704
E: bradley.wirt@psc.com
Jeremy Gerber
Piper Sandler & Co.
Senior Vice President
Philadelphia
T: 215 446-9320
E: jeremy.gerber@psc.com
Ogieva Guobadia
Piper Sandler & Co.
Senior Vice President
Houston
T: 281 907-4917
E: ogieva.guobadia@psc.com
Jenny Wade
Piper Sandler & Co.
Senior Vice President
Minneapolis
T: 612 303-6261
E: jennifer.wade@psc.com
Matt Wunderlich
Piper Sandler & Co.
Associate
Minneapolis
T: 612 303-6427
E: matthew.wunderlich@psc.com
Kaltrina Smelaj
Piper Sandler & Co.
Analyst
Minneapolis
T: 612 303-6974
E: kaltrina.smelaj@psc.com
Publication
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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