On June 30, 2026, the Office of Mergers and Acquisitions within the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the “SEC”) issued an exemptive order (the “Order”) granting standing relief from Rule 14e-1(a) and (b) under the Securities Exchange Act of 1934 to permit tender or exchange offers for non-convertible debt securities to remain open for a minimum of five business days—rather than the 20-business-day minimum under Rule 14e-1—subject to specified conditions. The Order memorializes and expands upon the principles reflected in an earlier no-action letter from 2015 and supersedes that letter and all similar prior staff letters. The Order also continues the SEC’s efforts to address market inefficiencies, as articulated in its Exemptive Order for Tender Offers for Equity Securities in April 2026.[1]
Unlike the 2015 no-action framework, the Order applies to all non-convertible debt securities, regardless of any rating by a nationally recognized statistical rating organization. The Order covers both cash tender offers and exchange offers that are exempt from registration under the Securities Act of 1933 (the “Securities Act”) and, in the case of exchange offers, are limited to certain enumerated participants.[2] An outline of the conditions for an offer to qualify for the five-business-day minimum offering period under the Order follows.
Qualifying offerors. The offer must be made by the issuer of the subject non-convertible debt securities, its direct or indirect wholly owned subsidiary or a parent company that owns 100 percent of the capital stock of such issuer.
Consideration. The offer must be solely for cash consideration and/or “Qualified Debt Securities,” which the Order defines as non-convertible debt securities for which interest is payable only in cash and that are substantially similar in all material respects (including as to the issuer(s), guarantor(s), collateral, lien priority and covenants) to either (i) the debt securities that are the subject of the offer or (ii) the most recent issuance of debt securities that are pari passu thereto (except, in either case, for the maturity date, interest payment and record dates, redemption provisions and interest rate). The consideration may be a fixed amount or at a fixed spread to a benchmark (e.g., U.S. Treasury Rates, SOFR or swap rates) announced at the commencement of the offer.[3]
Proration. If the offer is for less than all outstanding securities of the subject class or series and tenders exceed the amount the offeror is bound or willing to accept, securities must be accepted pro rata. The offeror must use commercially reasonable efforts to announce the proration factor by 10:00 a.m., Eastern Time, on the next business day after expiration of the offer, or as soon thereafter as practicable.
Disqualifying events. The offer may not be made: (i) when a default or event of default exists under any indenture or material credit agreement of the issuer or when the issuer is the subject of bankruptcy or insolvency proceedings or is engaged in certain other restructuring activities; (ii) in connection with consent solicitations to amend an agreement governing the subject securities requiring more than a simple majority approval; (iii) within ten business days of the first public announcement or the consummation of a change of control transaction involving the issuer or any other purchase or sale by the issuer or any of its subsidiaries of a material business or amount of assets that would require the issuer to furnish pro forma financial information under Article 11 of Regulation S-X; (iv) in anticipation of or in response to competing tender offers; or (v) concurrently with a tender offer that would add structural protections to another class of the issuer’s securities.
Timing and process. The offer must be announced by a press release containing basic terms and a hyperlink to offer documents by 10:00 a.m., Eastern Time, on the commencement date. Any changes to the percentage of principal amount sought (other than acceptance for payment of an additional amount of securities not exceeding two percent of the subject class or series) or consideration offered must be announced by 9:00 a.m., Eastern Time, on the third business day before expiration, and other material changes must be announced by 9:00 a.m., Eastern Time, on the second business day before expiration. In addition, payment of consideration may be made only promptly after expiration of the offer, and the offer must provide withdrawal rights exercisable (i) at least until the earlier of (a) the expiration date and (b) if the offer is extended, the tenth business day after commencement, and (ii) if the offer has not been consummated within 60 business days of commencement, at any time thereafter.
Issuers and holders should evaluate and update their execution procedures and timelines to account for the conditions laid out in the Order. The Order enables broader access to five-business-day debt tender and exchange offers—including for non-rated and non-investment-grade issuers that may not have qualified under the earlier no-action framework—and holders of non-convertible debt securities should be aware that tender and exchange offers may now expire in as few as five business days.
The expedited timeline contemplated by the Order can be used by issuers to help achieve their debt management objectives, provided that issuers pay close attention to the Order’s timing requirements and any relevant disqualifying events. With shorter execution timelines, issuers now will benefit from reduced exposure to interest rate movements and market volatility between announcement and settlement of many debt tender offers.
If you have any questions concerning the material discussed in this client alert, please contact the following members of our Securities and Capital Markets and Mergers and Acquisitions practices.
[1] For additional information on the April 2026 exemptive order, see Covington’s client alert linked here.
[2] The Order defines “Eligible Exchange Offer Participants” as qualified institutional buyers (as defined in Rule 144A under the Securities Act), non-U.S. persons (within the meaning of Regulation S under the Securities Act) and/or institutional accredited investors (within the meaning of Rule 163B(c)(2) under the Securities Act).
[3] In the case of an offer of Qualified Debt Securities, the interest rate or the spread used for determining the interest rate may be announced at the commencement of the offer as a range of not more than 50 basis points, as long as the final interest rate or spread is announced by 9:00 a.m., Eastern Time, on the business day prior to the expiration date of the offer.
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