Risk Factors
(Unregistered Debt Exchange Offer and Consent Solicitation)

Summary

These template risk factors discuss potential risks related to an unregistered debt exchange offer and consent solicitation, including risks for both exchanging and non-exchanging debt holders. These clauses include practical guidance and drafting notes. In a debt exchange offer, an issuer will offer new (generally more favorable to it) debt securities in exchange for previously issued debt securities. The issuance of new debt securities will trigger a registration requirement under the Securities Act of 1933, as amended, unless the issuer relies upon an exemption from registration (such as those provided by Section 3(a)(9) (15 U.S.C. § 77c(a)(9)) or 4(a)(2) (15 U.S.C. § 77d(a)(2)) of the Securities Act). A debt exchange offer is often coupled with a consent solicitation, wherein the issuer will seek to amend the terms of any previously issued debt securities that remain outstanding after the exchange offer is completed. If this is the case, the issuer’s acceptance of a holder’s tender will usually be contingent upon the holder consenting to proposed amendments to the existing debt terms. Consent solicitations are used to incentivize existing debt holders to participate in the exchange offer because, if the consent solicitation is successful, non-exchanging debt holders will be left with debt that has less favorable terms than prior to the amendment. These risk factors are intended to serve as a basis for drafting. You should carefully review each risk factor to determine whether the risk applies to your transaction and make such revisions as necessary to reflect the specific risk applicable to the issuer and the transaction. You should also make any conforming changes to language and defined terms based on your offering memorandum. Note that these risks factors are limited to risks related to the exchange offer; you should also include in the offering memorandum other risk factors applicable to any new issuance of debt securities, including risks relating to the issuer’s business and industry, as well as risks relating to the new debt securities. For more information on debt exchange offers, see Debt Securities Restructuring Options and Exchange Offers under Section 3(a)(9). For more information on drafting risk factors, see Risk Factor Drafting for a Registration Statement and Top 10 Practice Tips: Risk Factors.