Tax-exempt healthcare borrowers need to pay attention to the SEC’s unanimous vote this morning to amend Rule 15c2-12 governing municipal disclosure, effective December 1, 2010. The list of events that must be disclosed is expanded, and disclosure will be required within 10 days of occurrence. This represents a tightening of the prior rule which only required disclosure on a “timely basis”.
What is going on here is part of a bigger trend. In the last several years, municipal disclosure has become a major concern for bondholders and the general investing public. Yet disclosure remains a mystery for many healthcare borrowers who have not been properly informed of the consequences of incomplete or lagging disclosure. Municipal bond pricing lacks transparency, so without help, it’s hard for borrowers to understand how proper disclosure could have saved them hundreds of thousands of dollars in future interest payments. In cases where access to bond financing is compromised, some blame the markets instead.
What can hospitals do about it? Having to go back and fix disclosure discrepancies in the middle of a financing is not only embarassing, but also definitely not the kind of attention anyone would want when trying to tap the bond markets right now. Instead, we recommend that borrowers reassess their disclosure practices and monitor them on a proactive and ongoing basis. The cost of setting up and monitoring a disclosure program is minimal in light of the potential implications. If you don’t have a financial advisor already helping you on this, give us a call to discuss.