Guaranteed Debt Securities
The table below provides examples of required disclosures for guaranteed debt securities along with the related SEC rule. Note that the disclosures are for illustrative purposes only. A registrant should carefully tailor these examples to its own facts and circumstances to ensure that it is responsive to the requirements of Regulation S-X, Rules 3-10 and 13-01, for guaranteed debt securities.
Note also that the disclosures required for collateralized offerings may differ under Regulation S-X, Rules 3-16 and 13-02. For example, the combined summarized financial information for each affiliate whose equity is pledged as collateral would be reflected on a consolidated basis with its subsidiaries even if the stock of such subsidiaries was not pledged.
With respect to the periods presented below, preparers should be aware that the disclosure examples reflect the periods that would be required for a calendar-year-end company filing a quarterly report on Form 10-Q for the second quarter of 2021. In such a quarterly report, an entity would generally present the most recent interim year-to-date period as well as the balance sheet as of the end of the interim period and the prior year-end. Note that in an annual report on Form 10-K (or 20-F), the financial information as of and for the most recent annual period would generally be presented.
Sample Disclosures Related SEC Rule
Guarantor Information
On January 1, 2018, Company C’s consolidated subsidiary, Subsidiary A, issued debentures registered under the Securities Act of 1933 (the “Registered Debentures”). The Registered Debentures are fully and unconditionally guaranteed by Company C and certain of its consolidated subsidiaries on a joint and several basis. The Registered Debentures bear interest at 5% and mature in 2027. See note 5 of the consolidated financial statements for a description of the terms and conditions of the Registered Debentures, including covenants.
Rule 13-01(a)(1) — “A description of the issuers and
Table (continued)
Sample Disclosures Related SEC Rule
The guarantees are senior unsecured obligations of each guarantor, have equal rank with all existing and future senior debt of such guarantors, and are senior to all subordinated debt of such guarantors. The guarantees are effectively subordinated to any secured debt of such guarantors to the extent of the assets securing such debt. Each subsidiary guarantee is limited so that it does not constitute a fraudulent conveyance under applicable law, which may reduce the subsidiary’s obligation under the guarantee. There are no externally imposed restrictions on transfers of assets between Company C and its subsidiaries.
Rule 13-01(a)(2) — ”A description of the terms and
conditions of the guarantees, and how payments to holders of the guaranteed security may be affected by the composition of and relationships among the issuers, guarantors, and subsidiaries of the parent company that are not issuers or guarantors of the guaranteed security.”
Rule 13-01(a)(3) — “A description of other factors that
may affect payments to holders of the guaranteed security, such as contractual or statutory restrictions on dividends, guarantee enforceability, or the rights of a noncontrolling interest holder.”
Basis of Preparation
The following summarized financial information reflects, on a combined basis, the assets, liabilities, and results of operations of Subsidiary A, Company C, and certain of Company C’s consolidated subsidiaries that guarantee the Registered Debentures (collectively, the “Obligor Group”). Intercompany balances and transactions within the Obligor Group have been eliminated. Amounts attributable to the Obligor Group’s investment in consolidated subsidiaries of Company C that have not issued or guaranteed the Registered Debentures (the “Nonobligor Subsidiaries”) have been excluded. Amounts due to, amounts due from, and transactions with (1) Nonobligor Subsidiaries and (2) related parties are separately disclosed, as applicable.
Rule 13-01(a)(4) — “Summarized financial information
as specified in § 210.1-02(bb)(1) of each issuer and guarantor of the guaranteed security as follows, with an accompanying note that briefly describes the basis of presentation:
(i) The summarized financial information of each such issuer and guarantor consolidated in the parent company’s consolidated financial statements may be presented on a combined basis with the summarized financial information of the parent company;
(ii) Intercompany balances and transactions between issuers and guarantors whose summarized financial information is presented on a combined basis shall be eliminated; (iii) The summarized financial information shall
exclude subsidiaries that are not issuers or guarantors. An issuer’s or guarantor’s investment in a subsidiary that is not an issuer or guarantor shall not be presented. An issuer’s or guarantor’s amounts due from, amounts due to, and transactions with any of the following shall be presented in separate line items: (A) Subsidiaries that are not issuers or
guarantors; and (B) Related parties;
(iv) If the information provided in response to the requirements of this section (e.g., factors that may affect payments to holders of the guaranteed security) is applicable to one or more, but not all, issuers and/or guarantors, separately disclose the summarized financial information applicable to those issuers and/or guarantors. In limited circumstances (i.e., where the separate financial information applicable to those issuers and/or guarantors can be easily explained and understood), narrative disclosure may be provided in lieu of the separate
Income Statement Information
Year
Six Months Ended June 30, 20X1
Revenues $ 7,000 Revenues from Nonobligor
Subsidiaries 50 Revenues from related parties 75 Cost of revenues 4,000 Cost of revenues — Nonobligor
Subsidiaries 30 Cost of revenues — related parties 60 Gross profit 3,035 Income from continuing operations 2,050 Net income 2,000
Table (continued)
Sample Disclosures Related SEC Rule
Transactions with related parties are primarily related to sales to unconsolidated affiliates of Company C.
Balance Sheet Information
As of June 30, 20X1 As of December 31, 20X0 Current assets $ 5,000 $ 4,000 Current assets — due
from Nonobligor
Subsidiaries 45 40 Current assets — due
from related parties 55 50 Noncurrent assets 9,000 8,000 Current liabilities 1,000 750 Noncurrent liabilities 1,750 1,600 Redeemable preferred stock 500 500 Noncontrolling interests 60 50 Exhibit 22
List of Issuer(s) and Guarantor(s)
The following consolidated subsidiaries of Company C are issuer(s) or guarantor(s) of the Registered Debentures that bear interest at 5% and mature in 2027. Entity Role Company C Guarantor Subsidiary A Issuer Subsidiary B Guarantor Subsidiary C Guarantor Subsidiary D Guarantor Subsidiary E Guarantor Subsidiary F Guarantor
Regulation S-K Item 601(22) — “Subsidiary guarantors and issuers of guaranteed securities and affiliates whose securities collateralize securities of the registrant. List each
of the entities in paragraphs (b)(22)(i) and (ii) of this section under an appropriately captioned heading that identifies the associated securities. An entity need not be listed more than once so long as its role as issuer, co-issuer, or guarantor of a guaranteed security and/or as affiliate whose security is pledged as collateral for a registrant’s security is clearly indicated with respect to each applicable security:
(i) For a registrant that is the parent company (as that term is defined in § 210.3-10(b)(1) of this chapter) and subject to § 210.13-01 of this chapter, each of the registrant’s subsidiaries that is a guarantor, issuer, or co-issuer of the guaranteed security subject to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the offer and sale of which is being registered under the Securities Act of 1933.”