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SEC Issues New C&DIs Clarifying Its Guidance on Abbreviated Debt Tender Offers and Debt Exchange Offers
Practical Law Legal Update w-004-6255 (Approx. 4 pages)
SEC Issues New C&DIs Clarifying Its Guidance on Abbreviated Debt Tender Offers and Debt Exchange Offers
by Practical Law Corporate & Securities
| Published on 21 Nov 2016 • USA (National/Federal) |
The SEC's Division of Corporation Finance issued five new compliance and disclosure interpretations (C&DIs) that clarify its previous guidance on abbreviated debt tender offers and debt exchange offers.
On November 18, 2016, the SEC's Division of Corporation Finance (Division) issued five new compliance and disclosure interpretations (C&DIs) that provide clarification on the Division's January 2015 no-action letter that granted relief from Rules 14e-1(a) and (b) under the Exchange Act for certain abbreviated debt tender offers and debt exchange offers. For a summary of the no-action letter, see Legal Update, SEC's Division of Corporation Finance Issues New Guidance on Abbreviated Debt Tender Offers and Debt Exchange Offers.
A summary of the new C&DIs is set out below:
- New Question 162.01 clarifies that while the no-action letter states that a reporting company must furnish a press release announcing the abbreviated offer on a Form 8-K filed prior to 12:00 p.m. ET on the first business day of the abbreviated offer, a foreign private issuer may satisfy this condition by filing a Form 6-K.
- New Question 162.02 clarifies that although the no-action letter states that abbreviated offers must be made "for any and all" subject debt securities, this does not mean that abbreviated tender offers cannot have minimum tender conditions.
- New Question 162.03 provides clarification on the condition in the no-action letter that:
- abbreviated offers for cash consideration to all holders may be made for a fixed amount of cash or for an amount of cash calculated with reference to a fixed spread to a benchmark as of the last business day of the offer; and
- abbreviated offers for consideration consisting of "qualified debt securities" (as defined in the no-action letter) may be made to all persons who are qualified institutional buyers (QIBs) and non-US persons for a fixed amount of qualified debt securities or for an amount of qualified debt securities calculated with reference to a fixed spread to a benchmark, so long as a fixed amount of cash consideration is concurrently offered to persons other than QIBS and non-US persons to approximate the value of the offered qualified debt securities.
The C&DI clarifies that the amount of cash consideration offered concurrently to persons other than QIBs and non-US persons can be calculated with reference to a fixed spread to a benchmark, provided that the calculation is the same as the calculation used in determining the amount of qualified debt securities. - New Question 162.04 clarifies that offerors may issue qualified debt securities to "eligible exchange offer participants" (as defined in the no-action letter) under Section 3(a)(9) of the Securities Act, rather than under Section 4(a)(2) of the Securities Act or Rule 144A under the Securities Act, and still conduct an abbreviated offer in reliance on the no-action letter.
- New Question 162.05 provides clarification on one of the conditions in the no-action letter that the abbreviated offer not be commenced within ten business days after the first public announcement or the consummation of the purchase, sale, or transfer by the issuer or any of its subsidiaries of a material business or amount of assets that would require the furnishing of pro forma financial information with respect to the transaction under Article 11 of Regulation S-X (whether or not the issuer is a reporting company). The C&DI clarifies that:
- an offeror may announce the abbreviated offer at any time, but should not commence the abbreviated offer before 5:01 p.m. on the tenth business day after the first public announcement of the purchase, sale, or transfer of a material business or amount of assets; and
- if the abbreviated offer is commenced after 5:01 p.m. on a particular business day, the first day of the five business day period described in the no-action letter would be the next business day.
To learn more about debt tender offers and debt exchange offers, see: