On January 23, 2015, the Securities and Exchange Commission (SEC) granted no action relief in response to a letter submitted on behalf of a consortium of law firms seeking relief from rules regarding the length of time that tender or exchange offers for debt securities must be kept open, the nature of the debt securities for which tenders or exchanges are sought, and the type of consideration that may be offered. Under the general rules that apply to all tender offers for debt or equity, issuers or offerors must keep the offer open for a minimum of 20 business days. Beginning in the 1980s, the SEC began granting relief from the 20-business-day requirement in certain narrow circumstances. Specifically, the SEC allowed tender offers for non-convertible debt securities with an investment grade rating that were held open for a period of seven to 10 calendar days and met certain other qualifications.

By granting this new relief, the SEC has changed its previous position in a number of meaningful ways:

  • Change to Five Business Day Requirement : Under the new relief, offers may be kept open for a period as short as five business days, instead of the old seven-to-10-calendar-day requirement for certain debt tender offers.
  • Consideration May Consist of Qualified Debt Securities : Under the new relief, the consideration in such offers may consist of cash or “Qualified Debt Securities” or a combination of the two.
  • Elimination of Investment Grade Requirement : Under the new relief, offers may be made for debt securities that are not given an investment grade rating by a nationally recognized statistical rating organization.
  • Immediate Widespread Dissemination : For tender and exchange offers to qualify under the SEC’s new relief, the offeror must provide “Immediate Widespread Dissemination” of the offer materials in the manner specified by the SEC and described below; the prior practice for 10-day offers was to deliver the offer documents before midnight on the first day of the offer.

For a particular tender or exchange offer to qualify for the new relief, a number of specific criteria apply; these are detailed in the SEC’s no-action letter. Some of these criteria are as follows:

  • The offer must be for a class or series of non-convertible debt securities made by the issuer of the securities or certain subsidiaries or parents of the issuer, and not by any other third party.
  • The offer must be for any and all of such debt securities that are outstanding.
  • The offer must be solely for cash and/or Qualified Debt Securities, which are non-convertible debt securities that are identical in all material respects to the debt securities that are the subject of the tender offer except for the maturity date, interest payment and record dates, redemption provisions, and interest rate, provided that all Qualified Debt Securities must have all interest payable only in cash and a weighted average life to maturity that is longer than the debt securities that are the subject of the offer.
  • The offer must be open to all holders of the debt securities; however, if consideration for the offer consists of Qualified Debt Securities, then the offer must be restricted to “Qualified Institutional Buyers” (as defined by Rule 144A) and/or non-U.S. persons (as defined under Regulation S) in a transaction exempt from Securities Act registration, and persons who do not fit this criteria must be offered cash-only consideration as an alternative.
  • The offeror must provide “Immediate Widespread Dissemination” of the offer materials, meaning that:
    • the offer must be announced in a press release that discloses the basic terms of the offer;
    • the press release must contain an Internet address or hyperlink to the offer to purchase and letter of transmittal;
    • the press release must be issued through a widely disseminated news or wire service at or prior to 10 a.m. on the first business day of the offer;
    • the offeror must use commercially reasonable efforts to send via email the press release to all investors subscribing to one or more corporate action emails or similar lists; and
    • the offeror must use other customary methods in order to expedite the dissemination of information concerning the offer to holders of the debt securities.
  • If the issuer or offeror is a reporting company under the Securities Exchange Act of 1934, then the issuer or offeror must furnish the press release announcing the offer in a Current Report on Form 8-K prior to noon on the first business day of the offer.

Additionally, the offer may not: (i) be made in connection with a solicitation of consents to amend an indenture, form of security or note or other agreement governing the debt securities; (ii) be made if a default or event of default under the indenture exists; (iii) be made if at the time of the offer the issuer is subject to bankruptcy or insolvency proceedings; (iv) be financed with the proceeds of any “Senior Indebtedness,” as described in the SEC’s letter; (vi) be made in connection with a change of control transaction; (vii) be made in anticipation or response to other tender offers for the issuer’s securities; (viii) be made concurrently with a tender offer by the issuer for the issuer’s other securities if the effect of the offer would be to add obligors, guarantors or collateral or shorten the weighted average life to maturity of such other securities; and (ix) be commenced within 10 business days after the first public announcement or 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 information with respect to such transaction under Regulation S-X.