Amongst other limitations, an issuer will cease to be considered an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act and unable to take advantage of the accommodations for such issuers set forth in the Jumpstart Our Business Startups Act if it has issued more than $1.0 billion of non-convertible debt securities over a rolling three-year period (not limited to completed calendar or fiscal years). In general, all non-convertible debt securities issued over the prior three-year period, whether outstanding or not, are required to be counted against the $1 billion debt limit. "Non-convertible debt" in this context means any non-convertible security that constitutes indebtedness, whether issued in a registered offering or not. In calculating whether an issuer exceeds this $1 billion debt limit, the SEC Staff has interpreted all non-convertible debt securities issued by an issuer and any of its consolidated subsidiaries, including any debt securities issued by such issuer's securitization vehicles, to count against the $1 billion debt limit. As a result, asset-backed securities that are considered non-recourse debt and consolidated on a parent issuer's financial statements for accounting purposes should be included when calculating the applicability of the $1 billion debt limit. However, the SEC Staff does not object if an issuer does not count debt securities issued in an A/B exchange offer, as these debt securities are identical to (other than the fact that they are not restricted securities) and replace those issued in a non-public offering.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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