Section 107. Item 2.03 Creation of a Direct Financial Obligation under an Off-Balance Sheet Arrangement of a Registrant
us SEC - C&DI - Exchange Act Form 8-K
Question 107.01
Question: Instruction 2 to Item 2.03 states that if the registrant is not a party to the transaction creating the contingent obligation arising under the off-balance sheet arrangement, the four business day period begins on the “earlier of” (1) the fourth business day after the contingent obligation is created or arises, and (2) the day on which an executive officer becomes aware. How can a registrant disclose something of which it is not aware?
Answer: A registrant must maintain disclosure and internal controls and procedures designed to ensure that information required to be disclosed by the issuer in the reports that it files under the Exchange Act, including Current Reports on Form 8-K, is recorded, processed, summarized and reported within the required time frames. Instruction 2 to Item 2.03 provides for an additional four business days as a “grace” period given the nature of the requirement. [April 2, 2008]
Question 107.02
Question: If a registrant has a long-term debt issuance in a private placement that is coming due, and replaces it or refunds it with another long term debt issuance of the same principal amount and with similar terms in another private placement, is a Form 8-K required to be filed under Item 2.03?
Answer: Item 2.03 requires disclosure of a direct financial obligation that is material to the registrant. Materiality is a facts and circumstances determination. Whether the financial obligation is a refinancing on similar terms is one such fact; the amount of the obligation is another. Depending on other facts and circumstances (including but not limited to factors such as current impact on covenants, liquidity and debt capacity and other debt requirements), a registrant may be able to conclude that a financial obligation in this situation is not material. [April 2, 2008]
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