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“Testing The Waters”

“Testing The Waters”. Alexander F. Cohen, Latham & Watkins LLP March 25, 2010. What Are We Going to Cover Today?. Revisions to Rule 163 C&DI No. 139.29 Rules 165/166. Revisions to Rule 163. Rule 163 – exemption from Section 5(c)’s prohibition on pre-filing “offers” for WKSIs

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“Testing The Waters”

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  1. “Testing The Waters” Alexander F. Cohen, Latham & Watkins LLP March 25, 2010

  2. What Are We Going to Cover Today? • Revisions to Rule 163 • C&DI No. 139.29 • Rules 165/166

  3. Revisions to Rule 163 • Rule 163 – exemption from Section 5(c)’s prohibition on pre-filing “offers” for WKSIs • 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 • 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

  4. C&DI 139.29 • 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: • 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

  5. C&DI 139.29 Some open questions 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 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 5

  6. Rules 165/166 • Gun-jumping exemptions for certain communications in connection with “business combination transactions” • Definition includes “exchange offers” • Not historically used for simple debt restructurings • Only available to third-party exchanges? • Not available to “capital-raising or resale transaction” • Informal Staff view • 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

  7. Rules 165/166 Just to summarize how this works: 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) 7

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