(a) If an issuer or guarantor of a guaranteed security that is registered or being registered is required to file financial statements required by Regulation S-X with respect to the guarantee or guaranteed security, such financial statements may be omitted if the issuer or guarantor is a consolidated subsidiary of the parent company, the parent company's consolidated financial statements have been filed, and the conditions in paragraphs (a)(1) and (2) of this section have been met:
(1) The guaranteed security is debt or debt-like; and
(i) The parent company issues the security or co-issues the security, jointly and severally, with one or more of its consolidated subsidiaries; or
(ii) A consolidated subsidiary issues the security or co-issues the security with one or more other consolidated subsidiaries of the parent company, and the security is guaranteed fully and unconditionally by the parent company; and
(2) The parent company provides the disclosures specified in § 210.13-01.
(b) For the purposes of this section and § 210.13-01:
(1) The “parent company” is the entity that:
(i) Is an issuer or guarantor of the guaranteed security;
(ii) Is, or as a result of the subject Securities Act registration statement will be, an Exchange Act reporting company; and
(iii) Consolidates each subsidiary issuer and/or subsidiary guarantor of the guaranteed security in its consolidated financial statements.
(2) A security is “debt or debt-like” if it has the following characteristics:
(i) The issuer has a contractual obligation to pay a fixed sum at a fixed time; and
(ii) Where the obligation to make such payments is cumulative, a set amount of interest must be paid.
Note 1 to paragraph (b)(2). Neither the form of the security nor its title will determine whether a security is debt or debt-like. Instead, the substance of the obligation created by the security will be determinative.
Note 2 to paragraph (b)(2). The phrase “set amount of interest” is not intended to mean “fixed amount of interest.” Floating and adjustable rate securities, as well as indexed securities, may meet the criteria specified in paragraph (b)(2)(ii) of this section as long as the payment obligation is set in the debt instrument and can be determined from objective indices or other factors that are outside the discretion of the obligor.
(3) A guarantee is “full and unconditional,” if, when an issuer of a guaranteed security has failed to make a scheduled payment, the guarantor is obligated to make the scheduled payment immediately and, if it does not, any holder of the guaranteed security may immediately bring suit directly against the guarantor for payment of all amounts due and payable.
[85 FR 21999, Apr. 20, 2020]