Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1494420
Liability Management – What are the Options? (cont.) 6 Option Benefits Disadvantages New Notes/Loan • Familiar process to the company mostly requiring updates to existing documentation. • Existing investor/lender base. • More expensive and time consuming for the company than other options. • Subject to market conditions. Optional Redemption • Minimal documentation and no consents required. • Can be for whole or in part. • Premium cost and requires cash. • Subject to notice periods (between 10 and 60 days for bonds typically). Open market and privately negotiated repurchases • Helpful option for opportunistic buybacks when debt is trading at a discount. • Requires cash. • For bonds, only a portion (usually no more than 25%) can be repurchased at one time, among other structuring risks. Consent Solicitation • Can be completed very quickly and with few requirements on a standalone basis or in connection with a tender offer or exchange offer (i.e. exit consents). • Generally tax-free and minimal cash required. • In order to maximize holder participation, noteholders will need to be offered, in most cases, a consent fee for every $1,000. • If amendments are significant so as to "substantially" affect the rights of the debt security holders, the changes may constitute the issuance of a new security, raising tax and securities law concerns. Tender Offers • Requires only limited documentation and can be made in whole or in part and at a discount to nominal price. • Subject to SEC tender offer rules which includes procedural and substantive requirements and antifraud provisions. • Requires cash. Exchange Offers • Does not require any cash. • May be used as a non-bankruptcy restructuring option and can allow the issuer to effectively change "money" terms (i.e. principal, interest rate, currency and maturity) through the issuance of a new security. • Requires full bond offering documentation and prospectus disclosure. • Subject to SEC tender offer rules which includes procedural and substantive requirements and antifraud provisions. Liability Management and Refinancing Solutions in Europe