United States: Shortened Tender And Exchange Offer Periods For Non-Convertible Debt Securities

On January 23, 2015, the Securities and Exchange Commission staff issued a no-action letter reflecting their new position on expedited tender or exchange offers for non-convertible debt securities conducted under certain guidelines. The letter indicates that the staff of the SEC's Division of Corporation Finance will not object to issuers conducting these simple tender or exchange offers with deadlines that would be significantly shorter than those required by SEC regulations. The letter states that the staff will not recommend enforcement action with respect to tender or exchange offers for non-convertible debt securities that are held open for as few as five business days (as opposed to the 20 business days required by Rule 14e-1(a)), with potential extensions of as little as five business days following changes in the offered consideration or three business days following changes in other material terms of the offer. The no-action letter applies to both investment-grade and non-investment grade debt securities and supersedes previously issued no-action letters that had allowed similarly expedited tender or exchange offers only for investment-grade debt securities. However, the no-action letter also established several conditions that must be satisfied before an issuer of such securities may conduct a tender or exchange offer with deadlines shorter than those required by existing regulations.

Conditions

Generally, these offers must:

  • be made for any and all securities of a class or series of non-convertible debt;
  • be made by (i) the issuer of the securities, (ii) a wholly owned subsidiary of the issuer or (iii) a parent company of the issuer;
  • involve consideration consisting solely of cash1 or non-convertible debt securities that are (i) identical in all material respects to the targeted debt securities (including as to obligors, collateral, lien priority, covenants and other terms) except for the payment-related dates, redemption provisions and interest rate; (ii) have interest terms payable only in cash; and (iii) a weighted average life to maturity that is longer than that of the targeted debt securities;
  • be open to all record and beneficial holders of the targeted debt securities, although an exchange offer would be restricted to Qualified Institutional Buyers (as defined in Rule 144A) or non-U.S. persons (within the meaning of Regulation S) as long as other holders of the targeted series of debt securities would have the option to receive cash in an amount equal to the approximate value of the exchange offer consideration;
  • be announced no later than 10:00 a.m., Eastern time, on the first business day of the five business day period, through a widely disseminated press release,2 which in the case of an offer by an SEC reporting company must also be furnished almost immediately under a Current Report on Form 8-K;
  • permit tenders through guaranteed delivery procedures;
  • provide for certain withdrawal rights; and
  • not include early settlement features.

Changes in the offered consideration or other material terms of the offer may result in the requirement to extend the offer period, such that at least five business days remain from and including the announcement of any change in the offered consideration, and at least three business days remain from and including the announcement of any other material change in the offer. In a manner similar to the announcement of these expedited offers, issuers must notify investors of these material changes by a widely disseminated press release, and SEC reporting issuers must describe changes to the offered consideration almost immediately in a Form 8-K.

In addition, an offeror cannot avail itself of the shorter time periods for a tender or exchange offer for non-convertible debt securities if such offer is being made:

  • in connection with a consent solicitation to amend the documents governing the targeted debt securities;
  • at a time when there is a default or event of default under any of the issuer's material debt agreements;
  • at a time when the issuer is the subject of bankruptcy or insolvency proceedings or otherwise has commenced activity geared toward accomplishing an out-of-court restructuring or pre-packaged bankruptcy;
  • in anticipation of or in response to, or concurrently with, a change of control or other extraordinary transaction involving the issuer;
  • in anticipation of or in response to a competing tender offer;
  • concurrently with a tender offer for any other series of the issuer's securities made by the issuer or certain affiliates of the issuer if the effect of such offer would result in a change to the capital structure of the issuer (e.g., addition of obligors or collateral, increased priority of liens or shortened weighted average life to maturity of such other series); or
  • in connection with a material acquisition or disposition.

Changes from Current Practice

Although previous SEC no-action letters effectively permitted issuers of investment-grade non-convertible debt securities to hold tender offers for those securities open for as few as seven to ten days, this latest no-action letter supersedes those prior letters and allows the minimum tender or exchange offer period to be as short as five business days. Issuers of investment-grade non-convertible debt were also previously able to settle early as holders tendered in a shortened tender offer and were not required to provide withdrawal rights. This new no-action letter eliminates the ability to include early settlement features or to deny withdrawal rights. The letter's requirement that SEC reporting companies disclose the announcement of an offer and its basic terms, as well as any changes to the consideration offered, on a Form 8-K is also new.

Unlike issuers of investment-grade debt securities, issuers of high-yield non-convertible debt have not previously been permitted to conduct tender or exchange offers with periods shorter than those required by SEC regulations. Consequently, this new SEC staff position provides these issuers with a significantly faster way to conduct these offers. However, without the ability to combine the tender or exchange offer with exit consents to strip away restrictive high-yield debt covenants, the ability to conduct a tender or exchange offer on an expedited time frame may prove to have limited utility for such issuers.

Although it is important to understand that the issuance of a no-action letter does not have the effect of modifying existing federal securities rules and regulations or carry the weight of formal SEC guidance or interpretation, such letters are a well-established means for the SEC staff to guide issuers with respect to where the SEC will choose to exercise its enforcement powers. To read the full no-action letter, please see http://www.sec.gov/divisions/corpfin/cf-noaction/2015/abbreviated-offers-debt-securities012315-sec14.pdf.

Footnotes

1. The offer, however, cannot be financed using the net proceeds from debt that is senior in right of payment to the targeted debt securities or that otherwise occupies a higher position in the capital structure relative to the targeted debt securities (excluding borrowings under a pre-existing credit or debt facility).

2. In addition, the offeror would (i) use commercially reasonable efforts to circulate the press release via e-mail (or other electronic communication) to all investors subscribing to one or more corporate action e-mails or similar lists; (ii) use other customary methods to expedite dissemination of information regarding the abbreviated offer to the beneficial holders of the targeted debt securities; and (iii) issue a press release promptly after the consummation of the offer with the results of the offer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Kramer Levin Naftalis & Frankel LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Kramer Levin Naftalis & Frankel LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions