Investors Push Back on Private Companies Withholding Info

Private companies in Europe are facing greater pressure from bondholders to make their earnings public, according to an upcoming report by investor lobby group European Leveraged Finance Alliance (ELFA).

About half of those surveyed by ELFA said they’ve avoided investing in companies that request passwords, while 85 percent said they take a negative view of such debt issuers. About 38 percent of private high-yield borrowers restrict investor access to their financial data in some way, according to a separate search by Bloomberg.

Many privately owned companies keep their earnings behind password-protected websites, with some frequently changing their access codes. Others limit investor access by requiring proof of bond holdings or scrub financial data from their sites after redeeming their debt. Some companies have started requiring investors to keep information confidential with lengthy contracts akin to non-disclosure agreements (NDAs), according to ELFA’s report.

“It’s a real problem as an investor when you can’t access something as simple but crucial as the company’s financial information,” said Andrew Wilmont, a senior investment manager at Pictet Asset Management SA in Geneva, which is a member of ELFA. “How could you justify investing in these companies to your end customers?”

Wilmont keeps his own data on the trend and says as many as 26 percent of public and private high-yield issuers limit investor access. Bloomberg’s search puts the total figure at just under 20 percent.

European Union regulations don’t explicitly prohibit companies from requiring passwords, and the regulatory framework for borrowers is “blurry at best,” said ELFA, which counts Allianz Global Investors, Barings, and JPMorgan Asset Management among its members. Disclosure is governed by individual bond contracts, which determine how often and the extent to which a company reports.

Still, about two thirds of the more than 50 investors that responded to ELFA’s survey said they’ve perceived an increase in the practice over the past five years, despite a similar number saying they’ve shared their concerns with borrowers. Few issuers responded to a separate ELFA survey.

Tackling the Issue

“At some point, it will hurt these issuers to do this,” said Azhar Hussain, head of global high yield for Royal London Asset Management Ltd. “It should be one of the easiest things to change in the market, but the issue hasn’t ever really been tackled.”

Companies that require passwords include Swiss telecom Salt Mobile SA, controlled by French billionaire Xavier Niel, and U.K. fish producer Young’s Seafood. Spokeswomen for Salt and Young’s declined to comment on their restrictions.

Borrowers that use NDA-style click-through agreements include financial data firm Refinitiv, the financial data firm co-owned by the Blackstone Group LP and Thomson Reuters Corp., and Dutch chemical company Nouryon, formerly AkzoNobel Specialty Chemicals. Spokeswomen for Refinitiv and Carlyle Group, which bought Nouryon last year, declined to comment on the method.

“This practice is appropriate in distressed scenarios but entirely inappropriate when an investor is seeking information on a non-distressed company or immediately after issuance of a bond,” according to ELFA.

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