What Constitutes Inside Information for Corporate Bond Issuers?

The definition of inside information in the EU Market abuse regulation is a well-discussed (but nevertheless difficult) topic. However, almost all case law and literature relate to what constitutes inside information with regards to equities, and not most other types of securities. The topic of this article is to analyse what constitutes inside information for a corporate bond issuer according to Article 7 in the EU Market Abuse Regulation, and a bond issuers duty to disclose said information according to Article 17. The article presents five important factors generally influencing the pricing of bonds as financial instruments: the terms of the bond, credit risk (broken down into probability of default and loss given default), events affecting the economic rights of bondholders such as mandatory redemption, mandatory exchange of securities and changes in bond terms (call risk), interest rate risk and liquidity risk. Based on these factors, a number of concrete examples of situations when inside information may generally be assumed to arise is then discussed, namely in the event of changes in credit risk, changes in credit ratings, bond buy-backs and offers of voluntary exchanges of securities, mandatory exchanges of securities, changes of bond terms, breach of the terms, changes in bond seniority, and finally changes in ownership and delisting. Hopefully, the article contributes to clarifying the application of MAR for bond issuers, both in terms of how Articles 7 and 17 should generally be applied and understood, and in terms of how the rules should be applied in a number of specific situations as a starting point. The article also shows that the requirement for a bond issuer to disclose inside information is likely more far-reaching than is sometimes assumed.