Tender Offer Approved to Implement Classwide Debt Exchange Outside Plan of Reorganization

posted in: Workouts and Pre-Packs | 0

By Charles M. Oellermann and Mark G. Douglas, Jones Day

Debt-for-equity swaps and debt exchanges are common features of out-of-court and chapter 11 restructurings. For publicly traded securities, out-of-court restructurings in the form of “exchange offers” or “tender offers” are, absent an exemption, subject to the rules governing an issuance of new securities under the Securities Exchange Act of 1933 (the “SEA”) as well as the SEA tender offer rules. By contrast, it is generally understood that the SEA rules do not apply if an exchange or tender offer takes place as part of a restructuring under chapter 11 of the Bankruptcy Code, which provides that certain federal and state securities laws do not apply to the offer or sale of securities under a chapter 11 plan.

In Del. Trust Co. v. Energy Future Intermediate Holdings, LLC (In re Energy Future Holding Corp.), 2015 BL 44121 (D. Del. Feb. 19, 2015), Judge Andrews affirmed a bankruptcy court order approving a settlement between debtors and certain secured noteholders where the vehicle was a postpetition tender offer (of old notes for new notes to be issued under a debtor-in-possession facility). The district court ruled that a tender offer may be used to implement a classwide debt exchange in bankruptcy outside a plan of reorganization. It also held that the Bankruptcy Code’s confirmation requirements do not apply to a pre-confirmation settlement and that the settlement at issue did not constitute a sub rosa chapter 11 plan.

The full-length article discussing the ruling can be found here.