Turns out Geneva haven’t disclosed in their latest prospectus that they are in breach of their banking covenants, such that the bank could at any time require to repay everything they owe. Which they wouldn’t be able to do; not immediately anyway and,who knows, perhaps not at all. It takes time to refinance finance, and perhaps replacement financiers might not like what they saw given Geneva’s debt moratorium history.
The FMA announcement is here; it is an interim order that blocks Geneva from raising funds.
FMA is seeking further information from GFNZ while it considers whether it uses its power to order the offer documents to be corrected to FMA’s satisfaction or cancelled on the grounds that they are likely to deceive, mislead or confuse investors.
It is vital that existing and prospective investors have sufficient information about the company to make an informed assessment of their investments,
said FMA boss Sean Hughes.
Geneva responded that by golly they were voluntarily not going to raise them anyway, so your order didn’t matter. Take that, FMA!
Such silly attempted spin aside, it is not a bad thing to see the FMA cracking down on this sort of ommission. Sure, a “technical” breach of a banking covenant is unlikely to lead to a lender making all funds due and payable. But they could….and it is unfair to subscribers not to point it out. Wouldn’t YOU want to know it? The company can add as much explanatory material as they like, as long as they include the basics that the company could be shut down very quickly should its lender be so inclined.
Out of smaller points of principle such as this, a wider pattern of ethical disclosure may emerge. Plus a bit more care and attention to technical banking covenants.