On Friday, Glass Lewis issued a statement about how it will treat proxy access shareholder proposals through this WSJ article. The article opens with:
Proxy advisory firm Glass, Lewis & Co. is considering recommending shareholders vote against management’s preferred directors when firms ignore certain shareholder proposals on their proxies in favor of their own diluted alternatives. Glass Lewis said Friday it may recommend shareholders dissent from management-backed candidates if companies block shareholder-submitted proposals on the grounds that they “conflict” with the companies’ own proposals.
The Glass Lewis statement quoted in the article is:
Glass Lewis will evaluate the reasonableness and rationale of a company’s response to a proxy access shareholder proposal, including when the company submits an alternative access proposal and excludes the shareholder proposal, based on the differences in the terms of the proposals as well as analysis of the company, its governance, performance, board independence and responsiveness to shareholders.”
This Glass Lewis statement isn’t posted on the Glass Lewis site nor on its blog, at least not yet. As I noted in my blog last week entitled “Proxy Access Punt: Top 5 Things People Are Asking,” the reaction from the proxy advisors to the SEC not ruling on proxy access no-action requests this season should be an important factor in how companies respond to these proposals. ISS declined to comment for the WSJ article – but I imagine they will eventually come out with a statement too. And hopefully sooner rather than later…
Meanwhile, the Business Roundtable recently sent this letter to ISS and Glass Lewis, asking them not to apply their voting policies in a way that substitutes their own judgment in place of the board’s judgment and essentially asking them not to act since the SEC isn’t. And don’t forget our new “Proxy Advisors Handbook”…
Corp Fin’s No-Action Relief: 5-Business Day Debt Tender Offers Allowed
On Friday, Corp Fin’s Office of Mergers & Acquisitions issued a no-action response as fleshed out by this Gibson Dunn blog by Jim Moloney & Andrew Fabens (we’re posting memos about this in DealLawyers.com’s “Tender Offers” Practice Area):
Today, January 23, 2015, the Division of Corporation Finance (the “Staff”) granted a no-action letter that was submitted on behalf of a consortium of law firms, including Gibson Dunn, whereby the Staff agreed to not recommend Enforcement action when a debt tender offer is held open for as short as 5 business days. This letter builds upon an evolving line of no-action letters granted over the past three decades that have addressed not only the overall duration of debt tender offers (typically the rules require a minimum of 20 business days), but also formula pricing mechanisms (that allow a final price to be announced several days prior to expiration).
Following an extensive dialogue with members of the bar and numerous market participants, including issuers, investment banks and institutional investors that began several years ago, the Staff is now opening up the relief that it previously limited to “investment grade” debt securities. Under the no-action letter, “non-investment” grade debt securities are now eligible to be purchased on an expedited basis. In order to take full advantage of this relief, issuers will need to disseminate their offers in a widespread manner and on an immediate basis. This should enable more security holders to quickly learn about the offer and permit holders to receive the tender consideration in a shorter timeframe. In addition, the abbreviated offering period will allow more issuers to better price their tender offers with less risk posed by fluctuating interest rates and other timing and market concerns related to the offer.
Previously, the Staff limited “abbreviated” debt tender offers (i.e., seven to ten calendar days) to “all-cash” offers seeking to purchase investment grade debt securities where the offering materials were disseminated in hard copy by expedited means such as overnight delivery. The relief granted today enables issuers to conduct their offers for both investment grade and non-investment grade debt securities on a similarly short time-frame (i.e., five business days) so long as the offer is open to “any and all” of a series of non-convertible debt securities and the issuer widely disseminates its offer notice to investors and provides them with immediate access to the offering materials.
More importantly, the letter opens up the door to five business day exchange offers, provided that the offer is exempt from the ’33 Act registration requirements and the securities sought are “Qualified Debt Securities.” This term is generally defined as “non-convertible debt securities that are identical in all material respects . . . to the debt securities that are the subject of the tender offer except for the maturity date, interest payment and record dates, redemption provisions and interest rate.” Such exchange offers would need to be limited to QIBs and/or non-U.S. persons under Regulation S, with non-eligible exchange offer participants concurrently provided with the option of receiving a fixed cash amount that reasonably approximates the value of the Qualified Debt Securities.
While there are a handful of detailed conditions that an issuer must follow in order to qualify for the relief granted today, key amongst the conditions are that all five day offers must be announced by press release through a widely disseminated news or wire service disclosing the basic terms of the offer and an active hyperlink to the instructions or documents relating to the tender of securities. The press release must be issued no later than 10:00 a.m. (Eastern time) on the first business day of the offer. Public reporting companies must furnish the press release in a Form 8-K filed no later than 12:00 p.m. on the first business day of the offer. With respect to fixed spread tender offers that are tied to a benchmark such as Treasury or LIBOR, as well as exchange offers, the exact consideration offered (including the principal amount and interest rate of any Qualified Debt Securities offered) must be disclosed no later than 2:00 p.m. on the last business day of the offer. Also, the offer may expire as early as 5:00 p.m. on the last business day, which is significantly earlier than what prior Staff interpretations allowed, which required an offer to remain open until midnight for that day to count as a full business day.
Of course, some offers are explicitly precluded from taking advantage of the relief. Most notably offers involving a consent solicitation may not be conducted on a five business day time-frame. Similarly, the relief would not extend to, among other things: partial tender offers, third-party tender offers, waterfall debt tender offers, offers made when there is a default or event of default under the indenture or other material credit agreement, when the issuer is the subject of a bankruptcy or insolvency proceeding, or offers made in anticipation of or in response to a change of control or other extraordinary transaction such as a merger or other tender offer.
Webcast: “Alan Dye on the Latest Section 16 Developments”
Tune in tomorrow for the webcast – “Alan Dye on the Latest Section 16 Developments” – to hear Alan Dye of Section16.net and Hogan Lovells discuss the most recent updates on Section 16, including new SEC Staff interpretations and Section 16(b) litigation.
– Broc Romanek