Executive Summary
- What’s new: The SEC’s Division of Corporation Finance issued an exemptive order expanding the circumstances under which tender offers for non-convertible debt securities may remain open for a minimum of five business days, as opposed to the 20-business-day minimum offer period generally required under Rule 14e-1(a).
- Why it matters: The exemptive order supersedes the SEC staff’s January 2015 no-action letter, which set forth certain criteria for when a debt tender offer could be open for fewer than 20 business days. The division noted it is providing this exemptive relief to “address market inefficiencies, better reflect technological advancements, reduce exposure to fluctuations in the market and in interest rates and facilitate the availability of tender offers as debt management transactions.”
- What to do next: Issuers and their advisers will want to carefully review the conditions of the exemptive order to ensure compliance before launching an abbreviated debt tender or exchange offer. We provide a checklist of updated conditions.
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Background
Rule 14e-1(a) under the Securities Exchange Act of 1934, as amended (Exchange Act), requires all tender offers to remain open for at least 20 business days. Rule 14e-1(b) further requires that a tender offer remain open for at least 10 business days after any change in consideration.
Since 1986, the Securities Exchange Commission (SEC) staff has taken the position, through a series of no-action letters, that it would not recommend enforcement action if certain debt tender offers were conducted over abbreviated periods or if the offer did not remain open for the required 10 business-day period following a change in consideration, provided certain conditions were met. In January 2015, the SEC staff issued a no-action letter that superseded the prior letters, indicating that the staff would not recommend enforcement action under Exchange Act Rules 14e-1(a) or (b) if an issuer tender offer for non-convertible debt securities remained open for at least five business days (and was held open for at least five from and including the date of announcement of any change in the consideration offered), as long as the criteria set forth in the letter were satisfied.1
On June 30, 2026, the SEC’s Division of Corporation Finance issued an exemptive order, effective immediately, that supersedes the 2015 letter, significantly expanding the circumstances under which tender offers for non-convertible debt securities may remain open for a minimum of five business days.2
This exemptive order is part of the SEC’s ongoing initiative to ease compliance burdens and modernize the SEC’s regulatory framework.
Key Differences Between the Exemptive Order and Prior SEC Relief
The exemptive order includes a number of key differences from prior staff guidance on debt tenders for abbreviated offer periods, including the 2015 letter, such as:
- Permission for partial tender offers. In contrast to the conditions set forth in the 2015 letter, the exemptive order permits abbreviated tender offers for less than all of the outstanding subject securities, if certain conditions are met.
- Shortened periods for material changes. Under the exemptive order, issuers must announce changes in the amount of securities sought or consideration offered at least three business days (as opposed to five business days) before the expiration of the offer. Other material changes to the offer must be announced at least two business days (as opposed to three business days) before the expiration of the offer.
- Elimination of the prohibition of senior debt financing. The exemptive order eliminates the 2015 letter’s prohibition on financing the abbreviated offer with senior indebtedness.3
- Certain allowed consent solicitations. An issuer may make the offer in connection with a consent solicitation to amend the indenture, provided the amendment requires no more than the consent of a majority of the outstanding principal amount of the subject securities.
- Removal of the guaranteed-delivery-procedures requirement. The exemptive order eliminates the 2015 letter’s requirement that the abbreviated offer permit tenders through a guaranteed delivery procedure.4
- Increased flexibility for qualified debt securities. As further discussed below, the exemptive order revised the definition of “Qualified Debt Securities” to, among other things, include non-convertible debt securities that are substantially similar (as opposed to identical) in all material respects to the debt securities being tendered.
- Reduced change-of-control restrictions. The offer can be made in connection with a change-of-control transaction, provided the offer is not commenced within ten business days following the first public announcement or the consummation of a change of control or other extraordinary transaction, such as a merger.
Conditions of the Exemptive Order
Under the exemptive order, a tender or exchange offer for non-convertible debt securities may be conducted for a minimum of five business days if the following conditions are met:
✓ Eligible offeror. The offer must be made by (i) the issuer of the subject non-convertible debt securities, (ii) a direct or indirect wholly owned subsidiary of such issuer, or (iii) a parent company that directly or indirectly owns 100% of the capital stock (other than directors’ qualifying shares) of such issuer.
✓ Non-convertible debt securities, regardless of rating. The offer must be for a class or series of non-convertible debt securities, regardless of any particular rating assigned by any nationally recognized statistical rating organization.
✓ Consideration. The offer must be made solely for cash consideration and/or consideration consisting of Qualified Debt Securities.5
✓ Pro rata acceptance. If the offer is for less than all of the outstanding subject securities, and more securities are tendered than the offeror is bound or willing to accept, tendered securities must be accepted on a pro rata basis.6
✓ Participant restrictions for exchange offers. If the offer is an exchange offer involving Qualified Debt Securities, participation must be restricted to qualified institutional buyers,7 non-U.S. persons8 and/or institutions that are accredited investors9 in a transaction exempt from Securities Act registration.10
✓ Limited consent solicitation. The offer may not be made in connection with a solicitation of consents to amend the indenture, form of security or note, or other agreement governing the subject securities where such amendment requires the consent of more than a simple majority of outstanding principal amount.11
✓ No default or event of default. The offer may not be made when a default or event of default exists under the indenture or any other indenture or material credit agreement to which the issuer is a party.
✓ No bankruptcy or restructuring. The offer may not be made if (i) the issuer is subject to bankruptcy or insolvency proceedings, (ii) the issuer has commenced a solicitation for a pre-packaged bankruptcy or (iii) the board has authorized discussions with creditors for consensual restructuring.
✓ Press release and dissemination requirements. The offeror must announce the offer in a press release issued through a widely disseminated news or wire service by 10:00 a.m. ET on the commencement date. The press release must include (i) the basic terms of the offer, (ii) proration procedures (if applicable) and (iii) an active hyperlink to a website with tender offer materials, letter of transmittal (if any) and other related offer documents.12
✓ Changes in consideration or percentage sought. Any (i) increase or decrease in the percentage of securities sought (other than acceptance of an additional amount not exceeding 2%) or (ii) change in the consideration offered must be communicated by press release or other widely disseminated public announcement no later than 9:00 a.m. ET on the third business day before the expiration date.13
✓ Other material changes. Any other material change in the terms of the offer must be communicated by press release or other widely disseminated public announcement no later than 9:00 a.m. ET on the second business day before expiration.
✓ Withdrawal rights. The offer must provide withdrawal rights exercisable (i) at least until the earlier of (x) the expiration date and (y) if the expiration date is extended, the tenth business day after commencement, and (ii) at any time after the 60th business day if the offer has not been consummated.
✓ Proration announcement. If the offer is for less than all of the outstanding subject securities, the offeror must use commercially reasonable efforts to announce the proration factor by press release or widely disseminated public announcement by 10:00 a.m. ET on the next business day after expiration, or as soon thereafter as practicable.
✓ Prompt payment. The offeror must not pay consideration until promptly after expiration, pursuant to Exchange Act Rule 14e-1(c).
✓ Prohibited circumstances. The offer may not be (i) commenced within ten business days after the first public announcement or consummation of a change of control or extraordinary transaction, such as a merger, reorganization, liquidation or sale of all or substantially all assets; (ii) made in anticipation of or in response to other tender offers for the issuer’s securities; (iii) made concurrently with a tender offer for any other class or series of the issuer’s securities if the effect of such offer (by way of amendment, exchange or otherwise) would add obligors, guarantors or collateral or would increase lien priority; or (iv) commenced within ten business days after the first public announcement or consummation of a purchase, sale or transfer of a material business or assets requiring pro forma financial information under Article 11 of Regulation S-X.
Conclusion
The exemptive order meaningfully broadens eligibility criteria for abbreviated debt tender and exchange offers. Issuers and their advisers should carefully review the conditions of the exemptive order to ensure compliance before launching an abbreviated debt tender or exchange offer in reliance on the new exemptive order.
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1 See our February 12, 2015, client alert “SEC Staff Issues New Guidelines for Abbreviated Debt Tender Offers.”
2 Because an exemptive order utilizes delegated authority from the SEC, the relief can be relied upon by any offeror that meets the conditions of the order and is viewed as more authoritative.
3 The 2015 letter defined “senior indebtedness” as indebtedness incurred to finance all or a portion of the consideration in the tender offer (excluding indebtedness or borrowings under any credit or debt facility existing prior to the commencement of the offer) if such indebtedness (i) has obligors, guarantors or collateral (or a higher priority with respect to collateral) that the subject debt securities do not have, (ii) has a weighted life to maturity that is shorter than that of the subject debt securities or (iii) is otherwise senior in right of payment to the subject debt securities.
4 The 2015 letter required the offer to permit tenders through a guaranteed delivery procedure, by means of a certification by or on behalf of a holder that such holder is tendering securities beneficially owned by it and that delivery of such securities will be made no later than the close of business on the second business day after expiration of the offer.
5 The consideration may be a fixed amount or an amount based on a fixed spread to a benchmark (U.S. Treasury Rates, SOFR, swap rates or comparable foreign currency benchmarks). The issuer must announce the spread at commencement. If the interest rate or spread for Qualified Debt Securities is not fixed at commencement, the issuer must announce the rate/spread as a range of not more than 50 basis points, and then announce the final rate by 9:00 a.m. ET on the business day prior to expiration. The exact amount of consideration and interest rate must be fixed no later than the expiration time. For offers of Qualified Debt Securities, a minimum acceptance amount must be announced at commencement.
“Qualified Debt Securities” are non-convertible debt securities that are substantially similar in all material respects to either (i) the debt securities that are the subject of the tender offer or (ii) the most recent issuance of debt securities that are pari passu to the debt securities that are the subject of the tender offer, except in either case for the maturity date, interest payment and record dates, redemption provisions and interest rate; provided that Qualified Debt Securities must have all interest payable only in cash.
6 The 2015 no-action letter did not permit partial tender offers.
7 As defined in Rule 144A under the Securities Act of 1933, as amended (Securities Act).
8 Within the meaning of Regulation S under the Securities Act.
9 Within the meaning of Rule 163B(c)(2) of the Securities Act.
10 Accredited investors were not included among the list of eligible exchange offer participants in the 2015 no-action letter.
11 The 2015 no-action letter prohibited any consent solicitation.
12 In addition, the offeror must (i) use commercially reasonable efforts to send the press release via email to investors subscribing to corporate action email lists, (ii) use other customary methods to expedite dissemination to beneficial holders and (iii) issue a press release promptly after consummation with the results.
The 2015 no-action letter required issuers to furnish the launch press release or change-of-consideration notices on Form 8-K.
13 The 2015 no-action letter required five business days’ notice for changes in consideration.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.