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On January 23, 2015, a gleaming new No-Action Letter entitled "Abbreviated Tender or Exchange Offers for Non-Convertible Debt Securities" was issued by the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the "SEC Staff") and heralded the beginning of a new era in U.S. debt tender offer reform. The SEC Staff's new "21st century" guidelines have introduced (mostly) bright-line rules that permit qualifying tender / exchange offers for any and all non-convertible debt securities to be completed in five (5) business days. It has been almost 30 years since the last time the SEC Staff issued any no-action guidance on this subject in 1986 and 1990. The SEC Staff's 2015 guidance supersedes all their prior no-action guidance.

 

This is no ordinary No-Action Letter, folks!

 

The new No-action Letter is a celebration of cogitation, collaboration and compromise. Its provisions and guidelines were conceived, designed, modeled, remodeled, then . . . let's see . . . remodeled some more and finally assembled by a remarkable high-powered working group starring representatives of: (1) the SEC Staff and the SEC's Office of Mergers and Acquisitions, (2) the Credit Roundtable (more about them inside), (3) leading Wall Street investment banks, and (4) 18 leading U.S. law firms. The No-Action request letter submitted for the SEC Staff's "blessing" bears the signatures of 28 lawyers. Something pretty significant is afoot for sure!

is a richly illustrated "road trip" that explores not only the nitty-gritty of the new guidelines but lavishes equal attention on:

 

(1)     the "context" of the U.S. debt capital markets activity over the past three years,

 

(2)     an overview of the U.S. legal and regulatory provisions governing debt tender / exchange offers, and

 

(3)     valuable historical perspective on the SEC Staff's previous no-action guidance in this area.

 

GET DEBT "SHORTYFIED" is written in Avi Ganatra's signature irreverent style (well, it comes to you from the creator of The Irreverent Indenture), and will take you on an unforgettable odyssey through these latest reforms to sweep through the U.S. debt capital markets.

 

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Context is everything. In order to truly appreciate the impact of the SEC Staff's new guidelines on debt refinancings, this section explores the eye-popping amounts of investment-grade and high-yield debt securities that were issued in the United States over the past three years and how much of that issuance volume was driven by low interest rates and debt refinancing activity. (Hint: a LOT) 

 

Every road trip begins at . . . err . . . the beginning. A couple of excellent questions to pose at the beginning are "Is my transaction a "tender offer?" and "Can I buy back my debt securities and not bother with "tender offer" regulations?  These are deceptively simple questions and the SEC and the U.S. courts have established multiple factors to be used in analyzing and answering them.

 

In this section, you will explore:

 

Once you have driven over the Rubicon into debt "tender offer" land, you will find yourself subject to a (limited) world of U.S. tender offer regulations under the U.S. Securities Exchange Act of 1934 (the "Exchange Act"). Among other things, Rule 14e-1(a) under the Exchange Act requires that all tender offers, including debt tender offers, must remain open for at least 20 business days. (Holy Brake Lights!)

 

In this section, you will explore:

 

We drive back into the past. Almost 30 years ago, in a series of No-Action Letters issued in 1986 and 1990, the SEC Staff granted substantial "no-action" relief from the 20 business day requirement under Regulation 14E for qualifying issuer cash tender offers for any and all non-convertible investment-grade debt securities, which were permitted to remain open only for seven to ten calendar days. We are calling this historical set of guidelines "Route 1986."

 

In this section, you will explore:

 

The SEC Staff's Route 1986 no-action guidance, that permitted seven to ten calendar day issuer cash tender offers for any and all investment-grade non-convertible debt securities, was paved with the best of intentions. In the last several years, vocal and vigorous critics of Route 1986, including issuers, dealer managers, legal counsel who advise them and, above all, a coalition of debt investors, complained to the SEC Staff that Route 1986 was a woefully outdated roadmap that suffered from a lack of bright line specificity in its guidance AND its provisions did not take into account market practices and mechanics that effectively frustrated its good intentions. 

 

In this section, you will explore:

 

On January 23, 2015, a gleaming new No-Action Letter entitled "Abbreviated Tender or Exchange Offers for Non-Convertible Debt Securities" was issued by the SEC Staff and heralded the beginning of a new era in U.S. debt tender offer reform. The SEC Staff's new "21st century" guidelines have introduced (mostly) bright-line rules that permit qualifying tender / exchange offers for any and all non-convertible debt securities to be completed in five (5) business days

 

In this section, you will explore:

 

There are important "No Entry" situations in which an offeror's "License to Drive" on Route 2015 is revoked and offerors are banned from using Route 2015 for shortened debt tender / exchange offers.

 

These disqualifications are designed to, among others, keep out any transactions that would require target debt holders to make "credit decisions" about an issuer's business, capital structure, ability to pay its debts or strategic direction. The general idea is to permit entry only to "pure refinancing" transactions.

 

In this section, you will explore:

 

We are pleased to present detailed timelines and checklists that bring together in one place the key dates and related action items required by Route 2015. Our timeline assumes an offeror commences a Five Business Day offer and provides details on additional steps in case of either a five or three business extension.

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