In late September, the Municipal Securities Rulemaking Board
("MSRB") announced that it had taken steps to enhance the
bank loan disclosure submission process and the display of these
documents on MSRB's Electronic Municipal Market Access
This latest announcement is in keeping with the MSRB's
previously released advisory notices, in which the self-regulator
advocated for state, local and municipal bond issuers to
voluntarily disclose bank loans and other alternative financings.
Specifically, the MSRB has expressed concerns that these so called
"bank loans" could, among other things, potentially
impair the rights and seniority status of existing bondholders or
adversely impact the liquidity or credit profile of an issuer.
Bank loan financings are entered into directly between an issuer
and a bank without the involvement of an underwriter and are not
subject to the continuing disclosure rules of Securities and
Exchange Commission ("SEC") Rule 15c2-12. As such, no
offering disclosure documents are prepared and issuers are not
required to provide information about bank loans via EMMA. Bank
loans are seen, therefore, as a less expensive alternative to
traditional publicly issued bond transactions.
However, due to the lack of explicit requirements for issuers to
disclose bank loans, there is a concern that the investing public
may not become aware of an issuer's bank loan(s) until such
issuer's next public offering or the release of such
issuer's audited financial statements. In the eyes of the MSRB,
this "delay" in the release of information related to an
issuer's bank loan(s) could adversely impact the holders of the
issuer's outstanding bonds, as well as potential future
investors. In January 2015, the MSRB released Notice 2015-03, Bank Loan
Disclosure Market Advisory, in which it encouraged issuers
to voluntarily post information about their bank loan(s) "to
foster market transparency and to ensure a fair and efficient
The new disclosure submission process is the result of several
discussions between the MSRB and market participants which took
place earlier this year. Many state, local and municipal officers
complained that the submission process was confusing and actually
seemed to lose some of the submitted documentation. The officers
emphasized that the lack of disclosure of bank loans had less to do
with the issuers' failing to disclose and more with the
complexity of the submission process previously in place which made
it difficult to correctly submit and find the disclosed
In response to these concerns, the new process the MSRB
announced last month provides step-by-step instructions for issuers
to use when submitting information on bank loans and alternative
financings to EMMA and contains advanced search functions that will
allow EMMA users to search for securities associated with bank loan
The general consensus among those in the public finance industry
is that the issue of disclosing bank loans would be better
addressed with a change to the SEC's Rule 15c2-12. However, the
MSRB's facilitating the process of disclosing bank loans could
be seen as indicative of where the federal regulatory authorities
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