January 30, 2015

Backstory: Corp Fin’s 5-Business Day Debt Tender Offer No-Action Relief

This Bloomberg article does a nice job providing the backstory behind how 18 law firms came together with the Corp Fin Staff to get this no-action relief on debt tender offers out there. Here’s an excerpt:

Jim Clark, a partner at Cahill Gordon & Reindel LLP, headed the efforts to come up with a workable recommendation to amend Rule 14e-1(a) under the Securities Exchange Act of 1934. His goal was to come up with proposals that would satisfy the lawyers, as well as the investment banks and representatives of the Credit Roundtable, a group of large institutional fixed-income managers, involved.

What they finally agreed on, after months of conference calls and “many, many drafts,” was an eight-page letter to the SEC trying to establish guidelines for short-term debt tender offers in situations that don’t involve a change of control, or a company that is about to go bankrupt or other coercive situations, Clark said.

With the changes included in the SEC’s Jan. 23 no-action letter, many of these tender offers are now subject to a rule requiring them to remain open for only five business days as long as certain conditions are met. The SEC hadn’t addressed the guidelines — including how long a tender offer for debt had to remain open — since the mid-1980s, Clark said. In 1986, the tender-offer period was reduced from 20 business days to seven calendar days for some offers for investment-grade debt, but the application of the guidelines was neither consistent nor had they been updated to reflect the prevalence of high-yield debt, he explained.