Thursday, September 21, 2023
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SEC Proposes Short|Term Debt Disclosures

WASHINGTON (CN) - Registrants with the Securities and Exchange Commission will have to include a comprehensive explanation of their short term borrowing as part of any financial information disclosed in their corporate reports, proxy statements and SEC filing documents, under a new proposed rule.

According to the SEC's proposed rule requiring enhanced disclosure, the intention is to provide investors with a clearer understanding of a company's liquidity and working capital. While companies are currently required to list traditional sources of funding such as trade credit and bank loans, the amended rule would require them to list commercial paper, repurchase transactions and debt securitizations.

The cost of short term borrowing may be prohibitively expensive when credit markets freeze-up making it hard for companies reliant on such debt to maintain operations, and because market liquidity can change rapidly the actual stability of such companies can be difficult for investors to measure.

The proposed requirements would include a tabular graph showing short-term borrowing and a description of each position, the weighted average interest rate of all borrowings at the end of each financial disclosure period, and relative percentage of total short-term debt each position represents.

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