Transcript Exchange Offers and New Issue Rule Changes

“Testing The Waters”
Alexander F. Cohen, Latham & Watkins LLP
March 25, 2010
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What Are We Going to Cover Today?
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Revisions to Rule 163
C&DI No. 139.29
Rules 165/166
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Revisions to Rule 163
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Rule 163 – exemption from Section 5(c)’s prohibition on
pre-filing “offers” for WKSIs
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But, only applies to issuers, not transaction participants
SEC has proposed to revise the Rule to allow
underwriters to make offers on behalf of WKSIs
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WKSI would have to authorize underwriter in writing
WKSI would have to authorize any written or oral communication
before it is made
Prospectus would have to identify authorized underwriter making
authorized communication
C&DI 139.29
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SEC Staff will not object to lock-up agreements or
agreements to tender debt securities in an exchange offer
entered into prior to filing a registration statement if:
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Lock ups signed only by AIs
Persons signing lock-ups collectively own less than 100%
outstanding principal amount of the series
Tender offer will be made to all holders of the series
All holders eligible to participate in the exchange offer will receive
the same consideration
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C&DI 139.29
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Some open questions
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What about a communication short of a lock-up?
What about dealer-managers – is this only for issuers?
Does “debt securities” include convertible bonds?
Some informal SEC Staff responses
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No need to obtain a lock-up for C&DI 139.29 to apply
Staff is not focused on the precise form of agreement
Dealer-managers and others acting on behalf of an issuer benefit
from C&D 139.29
Applies to all types of debt securities, including converts
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Rules 165/166
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Gun-jumping exemptions for certain communications in
connection with “business combination transactions”
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Not historically used for simple debt restructurings
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Definition includes “exchange offers”
Only available to third-party exchanges?
Not available to “capital-raising or resale transaction”
Informal Staff view
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Rules 165 and 166 are available for all exchange offers, even
outside traditional business combination context
E.g., issuer self-tender otherwise subject to Rule 13e-4
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Rules 165/166
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Just to summarize how this works:
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Rule 166 applies prior to first public announcement; Rule 165
afterwards
Under Rule 166 any communication prior to announcement is
exempt from Section 5(c) (must take reasonable steps to prevent
further distribution)
Rule 165 exempts certain post-announcement communications
from Section 5(c) (written communications must be filed)
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