More Tools In The Liability Management Toolbox

As a result of recent Securities and Exchange Commission staff relief, companies, their management teams and boards now have enhanced flexibility in connection with a range of liability management transactions, from equity repurchases, refinancing outstanding debt securities through exchange or tender offers, or considering concurrent consent solicitations.

A company that wants to acquire a block of its own or another company’s stock may do so through a tender offer. Tender offers are subject to the general anti-fraud provisions of Section 14(e) of the Securities Exchange Act of 1934. A self-tender may be subject to Rule 13e-4. Historically, Exchange Act Rules 13e-4(f)(1)(i) and 14e-1(a) each required tender offers to remain open for at least 20 business days. Given technological developments and changes in the capital markets, the 20-business day rule has been criticized as unnecessarily restrictive. In April 2026, the staff of the SEC’s Division of Corporation Finance (the division) issued an exemptive order permitting a tender offer for any class of equity security to remain open for a minimum offering period of 10, instead of 20, business days. The order applies to certain offers for equity securities of public and private companies.

For an issuer self-tender subject to Rule 13e-4, the exemptions are subject to the following conditions:

• The offer is made for less than all outstanding securities of the subject class.
• The consideration consists only of cash at a fixed price.
• The offer is not subject to Rule 13e-3; the offer is not made in reliance on the cross-border exemption.
• The offer is announced in a press release issued through a widely disseminated news or wire service that includes the offer terms and an active hyperlink to a website where shareholders can access the tender offer materials.
• Any increase or decrease in the percentage of the class of securities sought in the offer or any change in the offered consideration is communicated through a broadly disseminated announcement no later than the fifth day before expiration and any other material change to the offer terms are communicated no later than the second day before expiration.

This relief will be useful for public companies that seek to purchase their own shares and return capital to shareholders. The offer can be made, from time to time, as an alternative to, or in addition to, other issuer repurchases, such as open-market stock buybacks or accelerated share repurchase programs.

In June 2026, the division issued an exemptive order allowing certain qualifying tender or exchange offers for nonconvertible debt securities to remain open for a minimum of five business days, instead of the 20 business days required under the Exchange Act. This 2026 relief supersedes relief provided in a 2015 no-action letter related to abbreviated offering periods in tender and exchange offers for nonconvertible debt securities. The recent exemptive relief expands and enhances the relief afforded by the 2015 letter, including relaxing or eliminating some of the prior qualifying conditions. As with the equity tender relief, the division explained that this exemptive relief aims to address market inefficiencies, better reflecting technological advances, reducing exposure to market and interest rate fluctuations, and facilitating the availability of tender offers.

The 2026 relief relaxes many of the prescriptive notice and procedural requirements and introduces important substantive flexibility relating to the terms of the offer, including but not limited to the following:

• Allowing partial tender offers, subject to proration and the offeror publicly announcing the proration factor used.
• Widening the base of potential participants to allow institutional accredited investors to participate in unregistered exchange offers.
• Permitting a concurrent consent solicitation and tender offer as long as the proposed amendment does not require the consent of more than a simple majority of the principal amount of the subject debt securities.
• Easing the requirements relating to what constitutes “qualified debt securities.”
• Eliminating the prohibition against financing an offer with senior indebtedness.

By eliminating the condition that an abbreviated tender offer be made for “any and all” outstanding securities of the subject class, the 2026 order provides companies flexibility to conduct partial or capped offers, taking into account real-time market windows and cash availability considerations. This includes the ability to conduct cascading or “waterfall” capped tender offers. Inclusion of institutional accredited investors within the eligible offer participants (in addition to qualified institutional buyers and non-U.S. persons), and the elimination of the requirement for a concurrent cash tender offer to retail investors, encourages the use of exempt exchange offers. The new relief allows a consent solicitation to be conducted concurrently with a tender offer, as long as the proposed amendment does not require consent of more than a simple majority of the principal amount of the subject debt securities. Many companies will be able to take advantage of this new accommodation, as most investment-grade and high-yield indentures generally require consent of only a simple majority for most corporate actions, including covenant strips.

The 2026 order significantly expands the availability of abbreviated tender offers as a liability management tool and enhances a company’s ability to manage, modify and optimize its outstanding debt securities. This new relief should enable a company to use tender offers and exchange offers in many more circumstances and to do so opportunistically to address debt maturities. Also, tenders and exchange offers can be used in combination with other liability management transactions, such as consent solicitations and privately negotiated or open-market debt repurchases. Becoming familiar with the conditions in these orders, and the range of available options, will empower a company to think creatively to address its capital structure, reduce financial risk, improve liquidity and achieve other goals.

Originally published by Directors & Boards.