Top 10 Practice Tips: Debt Tender Offers

The following 10 practice points are intended to help you in assisting an issuer with a proposed debt tender offer for cash. Often, issuers of debt securities seek to manage their outstanding obligations through liability management transactions, including debt tender offers for cash. Indeed, given the current low interest rate environment, companies may consider borrowing new debt to be a cheaper alternative to maintaining existing debt with higher fixed coupons. Companies may then use the proceeds from a new debt issuance or cash on hand to repurchase their outstanding debt with higher fixed coupons, thereby reducing their overall interest expense. Also, many companies with LIBOR or other IBOR-based debt with maturities extending beyond the transition date have, in the recent year, chosen to tender for these securities rather than to contemplate modifying the base rate. A cash tender offer consists of a public offer by the issuer to purchase all or a portion of the outstanding principal amount of the relevant debt securities from the holders at a specified price, and subject to conditions, set forth in the issuer’s offer to purchase.