Letters to the editor

Disclosure: mum’s the word

Sir,
One would have thought that the wringing of hands and gnashing of teeth that followed Enron, WorldCom and Parmalat would have chastened corporate managements. Apparently not.

Take DPL. The firm’s initial 8-K detailing the requested extension for filing the 10-K provided investors with no reasons for the delay. Moreover, the company did not signal to investors that failure to file certified financials by March 30 could be construed as an event of default under loan agreements.

When the company filed an 8-K, announcing the successful completion of a $175m private placement as a part refinancing of $500m debt maturing within weeks, it again failed to allude to an imminent potential covenant breach.

As March 30 came and went, management deigned to announce a technical default and the granting of waivers but casually tacked on a reference to “non compliance under…other debt agreements” which did not result in an “immediate” event of default. What other debt agreements? And if it is not an immediate condition of default, would it not be nice to know when it became one?

Some managements, it would appear, still feel that disclosure, particularly to fixed-income investors, is a case of the less said, the better. Caveat emptor!

Yours truly,
Name withheld

No laughing matter

Sir,
I read with interest your article on the FSA’s proposed regulation of bank research analysts, CP205. While it won’t win any awards for comedy, it did demonstrate the range of reactions from the heads of sell-side research. From my perspective, the banks’ responses seem to stretch from exporting the entire team to Delhi to ignoring the whole issue.

However the article lacked some of the “FSA don’t know their … from their …” quotes that I hear on a day-to-day basis. This may well be that compliance officers are winning the day. For my own part, I’m a big fan of the ‘ignoring strategy’ for the main reason that it is hard to be out of date with changes when nothing has changed.

Lastly, I would like to point out that Credit badly needs to update its photo library.

Yours truly,
Robin Keck
Credit Research
Michael Page City