SEC issues exemptive order expanding availability of five-business-day tender offer for certain non-convertible debt securities
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On June 30, 2026, the Division of Corporation Finance of the U.S. Securities and Exchange Commission issued an Exemptive Order for Tender or Exchange Offers for Non-Convertible Debt Securities (the "2026 Exemptive Order") replacing the Division's 2015 no-action letter (the "2015 Letter"), expanding the permission for certain abbreviated tender offers for non-convertible debt securities to remain open for a minimum of five business days, rather than the 20 business days required under Rule 14e-1(a).
The 2026 Exemptive Order follows an April 2026 companion exemptive order permitting 10-business-day tender offers for equity securities. The Division cited its recent efforts to modernize the tender offer framework by permitting abbreviated offer periods while preserving key investor protections.
What changed?
The 2026 Exemptive Order's conditions are more permissive than those of the 2015 Letter, and it broadens the scope of transactions that may benefit from the reduced minimum offering period. These changes are particularly helpful for non-investment grade issuers looking to refinance their debt through liability management transactions. The most material changes that expanded the availability of the five-business-day tender offer include:
- Permission for partial tender offers. The 2026 Exemptive Order allows issuers to conduct partial or capped tender offers, subject to proration if oversubscribed, while the 2015 Letter required "any and all" securities to be subject to the tender offer. This expansion permits issuers to conduct liability management exercises to retire a specific amount of outstanding notes. This is particularly useful in connection with tender offers funded with proceeds of new issuances;
- May now combine with consent solicitations. A five-business-day tender offer may now be combined with a consent solicitation, as long as the amendment does not require consent of more than a simple majority of the noteholders. This is a significant change from the 2015 Letter, which imposed a blanket prohibition on consent solicitations in connection with the tender offer. This will make five-business-day tender offers accessible to issuers seeking covenant amendments or technical changes, permitting certain exit consents, but still restricting concurrent consents releasing all or substantially all collateral or changing key terms of the notes;
- Expansion of the permitted consideration for exchange offers. The 2026 Exemptive Order changed the definition of "Qualified Debt Securities" which, along or instead of cash, may be given in consideration for the tender offer, to mean securities "substantially similar in all material respects" to the securities that are the subject of the tender or to the most recent issuance of debt securities that rank pari passu to the subject securities, except for maturity date, interest payment and record dates, redemption provisions, and interest rate. The 2015 Letter required "Qualified Debt Securities" to be identical in all material respects to the subject securities, which resulted in issuers often not being able to exchange older debt securities for new debt securities due to changes in market standards. The 2026 Exemptive Order also removed the requirement that participants in an exchange offer (other than QIBs or non-US persons) be given a concurrent cash consideration option. The 2026 Exemptive Order enables issuers to take advantage of the shorter timeline to exchange debt securities for new debt securities with improved and updated covenant packages without offering alternative cash consideration;
- Expansion of pool of investors that may participate in exchange offers. The 2026 Exemptive Order permits institutional accredited investors to participate in five-business-day exchange offers, while the 2015 Letter restricted participation in abbreviated exchange offers to QIBs and non-US Persons; and
- No restriction on financing the tender with proceeds from senior indebtedness. The 2015 Letter included a prohibition on abbreviated tender offers being financed with proceeds of senior indebtedness. The removal of this prohibition in the 2026 Exemptive Order provides flexibility that will permit five-business-day tender offers to be a tool for a broader range of transactions.
Comparison of 2015 No-Action Letter and the 2026 Exemptive Order:
| 2015 Letter | 2026 SEC Exemptive Order | |
| Legal Form of Relief | Informal no-action relief (staff would not recommend enforcement action under Rules 14e-1(a) and (b)). | Formal exemptive order issued pursuant to delegated SEC authority. |
| Offer Scope | Any and all of the subject debt securities. | May be for less than all outstanding securities; pro rata allocation required if oversubscribed; offeror must use commercially reasonable efforts to announce the proration factor by press release or other widely disseminated public announcement by 10:00 a.m. Eastern time on the next business day after the expiration date of the offer, or as soon thereafter as practicable. |
| Qualified Debt Securities | Qualified Debt Securities are securities that are "identical in all material respects" to subject securities; must have longer weighted average life to maturity. | Qualified Debt Securities are non-convertible debt securities that are "substantially similar in all material respects" to either the debt securities subject of the tender offer or the most recent pari passu issuance of debt securities, except for maturity date, interest payment and record dates, redemption provisions, and interest rate; no weighted average life to maturity requirement; all interest must be payable only in cash. |
| Permitted Consideration | Cash and/or Qualified Debt Securities. | Cash and/or Qualified Debt Securities. |
| Consideration Pricing Deadline | Exact amount of consideration on Qualified Debt Securities must be fixed no later than 2:00 p.m. Eastern time on the last business day of the offer. | No later than the expiration time of the offer. |
| Eligible Participants for Exchange Offers | Qualified Institutional Buyers and non-US persons only. | Qualified Institutional Buyers, non-US persons, and/or institutions that are accredited investors under Rule 163B(c)(2) of the Securities Act. |
| Cash Alternative for Non-Eligible Holders | Required. Non-eligible holders must be given concurrent cash option. | Removed. |
| Consent Solicitations | Blanket prohibition on concurrent consent solicitation. | Permitted if the amendment requires consent of the holders of no more than a simple majority of the outstanding principal amount of the subject securities. Prohibited if supermajority or higher consent threshold is required. |
| Senior Indebtedness Financing | Prohibited: offer may not be financed with senior indebtedness. | No restriction on financing sources. |
| Guaranteed Delivery Procedure | Required: two business day period. | Removed. |
| Form 8-K Filing Requirement | Required for reporting companies by noon on first business day. | Removed. |
| Notice of Changes to Offer — Change in Consideration or Percentage of Securities Sought | Offer must remain open for at least five additional business days after announcement of a change in consideration. | Changes in consideration or in the percentage of securities sought (other than acceptance of an additional amount not exceeding 2% of the class) must be announced by press release or other widely disseminated public announcement by 9:00 a.m. Eastern time on the third business day before expiration. |
| Notice of Changes to Offer — Other Material Changes | Offer must remain open for at least three additional business days after announcement of other material changes. | Must be announced by press release or other widely disseminated public announcement by 9:00 a.m. Eastern time on the second business day before expiration. |
| Extraordinary Transaction Restriction | Offers may not be made "in anticipation of or in response to, or concurrently with" a change of control or extraordinary transaction. | Offers may not commence within 10 business days after the first public announcement or consummation of extraordinary transactions. |
| Benchmark Rate | London Interbank Offered Rate (LIBOR). | Secured Overnight Financing Rate (SOFR) replaces LIBOR. |
Key takeaways
- 2026 Exemptive Order grants a formal exemption from Exchange Act Rules 14e-1(a) and (b) to permit tender and exchange offers for non-convertible debt securities to remain open for a minimum of five business days, superseding the 2015 Letter, which provides a stronger and more durable legal foundation for abbreviated debt tender offers.
- The 2026 Exemptive Order added flexibility and expanded the five-business-day tender offer as a tool for a broader range of transactions. Issuers can now use the tool for partial, prorated offers funded with structurally senior or secured debt to a broader group of investors now including institutional accredited investors.
- Issuers may also exchange existing debt securities for new debt securities with more flexible covenant packages that align more closely to the market practice at the time of the exchange, rather than the market at the time of the original issuance.
- This enables issuers to take less market risk and take advantage of certain market windows, thereby reducing pricing and execution risk.
Alexandra Santana (Associate, White & Case, Houston) contributed to the development of this publication.
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