On November 18, 2016, the Staff of the Securities and Exchange Commission (SEC) issued new Compliance and Disclosure Interpretations (C&DIs) (Questions 162.01 through 162.05) to provide guidance on the Abbreviated Tender or Exchange Offers for NonConvertible Debt Securities no-action letter issued in January 2015 (the No-Action Letter).
As discussed in a previous post, this No-Action Letter addresses the circumstances under which issuers may conduct abbreviated five-business-day tender or exchange offers for their nonconvertible debt securities (the Abbreviated Offer) instead of the 20 business days normally required by Rule 14e-1(a) of the Exchange Act of 1934, as amended (the Exchange Act).
According to the No-Action Letter, if an Exchange Act reporting company wants to conduct an Abbreviated Offer, it must furnish a press release announcing the offer by filing it on a Form 8-K with the SEC no later than 12 noon Eastern on the first business day of the offer. In C&DI Question 162.01, the SEC Staff clarifies its view that reporting companies that are foreign private issuers can satisfy this condition by filing a Form 6-K.
The No-Action Letter states that the consideration in an Abbreviated Offer must be “for any and all” of the class or series of nonconvertible debt securities subject to the offer. This requirement, according to C&DI Question 162.02, would not prevent an Abbreviated Offer from having minimum tender conditions (i.e., an offer condition that a minimum percentage of the outstanding debt securities subject to the Abbreviated Offer be tendered or exchanged, as applicable).
When an Abbreviated Offer is made to QIBs (as defined in Rule 144 under the Securities Act of 1933, as amended (the Securities Act)) and non-U.S. persons (as defined in Regulation S under the Securities Act) (Eligible Exchange Offer Participants), and the consideration consists of Qualified Debt Securities (as defined in the No-Action Letter), then the No-Action Letter provides that the amount of consideration can either be fixed or calculated with reference to a fixed spread to a benchmark (such as Treasury Rates or LIBOR) as of the last business day of the exchange offer. However, because only Eligible Exchange Offer Participants can receive Qualified Debt Securities as consideration, the issuer must concurrently offer a fixed amount of cash consideration to any offerees who do not qualify as Eligible Exchange Offer Participants. Furthermore, the cash consideration must approximate the value of the Qualified Debt Securities being offered to the Eligible Exchange Offer Participants. C&DI Question 162.03 states the SEC Staff’s view that, instead of concurrently offering a fixed amount of cash to persons who do not qualify as Eligible Exchange Offer Participants, an issuer may alternatively offer an amount of cash consideration calculated with reference to a fixed spread to a benchmark, so long as the calculation is the same one used in determining the amount of Qualified Debt Securities offered to Eligible Exchange Offer Participants.
In C&DI 162.04, the SEC Staff states that an issuer can rely on the No-Action Letter to conduct an Abbreviated Offer even if it issues Qualified Debt Securities to Eligible Exchange Offer Participants under Section 3(a)(9) of the Securities Act instead of Section 4(a)(2) of the Securities Act or Rule 144A.
Under the No-Action Letter, an Abbreviated Offer cannot be commenced within 10 business days after the first public announcement or consummation of any material transaction that would trigger the furnishing of pro forma financial information with respect to such transaction pursuant to Article 11 of Regulation S-X (whether or not the issuer is a registrant under the Exchange Act). In C&DI 162.05, the SEC Staff clarifies that the Abbreviated Offer may be announced at any time, but it should not be commenced prior to 5:01 p.m. on the tenth business day after the first public announcement of such material transaction. The SEC Staff also explains that, 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 would be the next business day.
