The Board of Oslo Børs has considered the question of whether Kværner breached the duty of disclosure set out in § 5-2, first paragraph, of the Stock Exchange Regulations by failing to promptly inform the market of the serious liquidity problems that arose in September 2001. The Stock Exchange Regulations require that an issuer shall on its own initiative promptly provide the exchange with any information which must be assumed to have a material bearing on the price of the issuer's shares.
Kværner became aware in summer 2001 that it did not have sufficient funding available to meet its expected cash flow needs in mid-September. The company immediately entered into negotiations with its main banking relationships with a view to arranging sufficient financing. Throughout this process Kværner received positive feedback from one bank that it would be possible to arrange financing of USD 200 million. The bank in question indicated that it would subsequently place the loan as a high-yield bond in the American market. The loan was due to be approved by the bank's credit committee on 12 September, but approval was refused. Following this, the company worked with other banks over the next few days to attempt to resolve the liquidity crisis. A matching halt was subsequently imposed on trading in the company's shares on 17 September. It proved impossible to arrange financing without simultaneously raising additional share capital.
Kværner first advised Oslo Børs of its liquidity problems in the afternoon of 17 September, and the company released this information to the market in the morning of 19 September. Oslo Børs takes the view that information on Kværner's liquidity situation should have been disclosed to the market at an earlier date, and certainly no later than 12 September. The duty to disclose information must be considered against the background of an overall evaluation of the company's situation, and the determining factor must be the difference between the information known to the market and the actual situation. Following the bank's refusal to approve the loan application on 12 September, Kværner's actual financial situation was so different from the information known to the market, among others from the 2nd quarter report, that the company should have made an announcement at that time. Kværner was indeed still optimistic that it would be able to arrange the necessary financing despite this refusal, and took the view that the refusal was in all likelihood caused by the bank lacking confidence in its ability to place the loan in the American market. Moreover the bank in question was still willing to participate in a syndicated loan. However in the view of Oslo Børs, the price sensitive issue at stake was not the refusal itself, but the situation in which the company found itself. The refusal by the bank on 12 September meant that the process of raising necessary financing would be more time-consuming, and would involve greater risk that the necessary financing would not be available.
Oslo Børs is also of the view that an important factor is that the company's problems were very acute by 12 September. Kværner needed to have access to additional funds as soon as 17 September, and there was an imminent risk that the liquidity problem could only be resolved by measures that would have a major impact on the company's share price.
Oslo Børs has placed great importance on evaluating the situation as it unfolded at the actual time rather than relying on the benefit of hindsight. A number of the problems that Kværner subsequently encountered were caused by factors that developed after 17 September. This approach, and the fact that this matter raises very difficult questions on the precise point in time at which the duty of disclosure arises, and balance between the markets need for information and the company´s need to work with the refinancing, have been taken into account in assessing the amount of the violation charge.
