Marketplace Highlights Opportunities for Exchange Offers

The recent turmoil in the financial markets and slowing economic growth has led to companies taking a variety of steps to de-lever their balance sheets and/or tap new or cheaper funding sources. Evidence of this includes recent exchange offers and debt tender offers, including those launched by GMAC, CIT Group, Harrah’s Entertainment and Realogy. Residential Capital and Tyco International both completed exchange offers earlier this year. Companies are using exchange offers to increase regulatory capital (in the case of CIT Group and GMAC) as well as to de-leverage and extend the weighted-average maturity of their outstanding debt (ResCap, Harrah’s, Realogy, Tyco). Others will no doubt follow, and those who do should be aware of the legal context in which exchange offers take place. My colleagues Lawrence S. Makow, David E. Shapiro, and Alison M. Zieske, and I have issued a memorandum entitled “Today’s Marketplace Highlights Increasing Use of and Great Opportunities for Exchange Offers,” which summarizes various considerations which should be taken into account in structuring exchange offers and debt tender offers. These include tender offer rules, pricing methods, inducement payments for early delivery and solicitations, consent solicitations, registration rights, foreign exchange listings, effect on a company’s existing obligations, and appropriate disclosure in offering documents.

The memorandum is available here.