Liability Management: Structuring and Executing Equity Rights Offerings for Distressed Domestic Issuers Outside of Chapter 11 Bankruptcy

During the Covid-19 pandemic, many distressed companies incurred substantial debt, and in particular, convertible debt, to address liquidity shortfalls. Much of these pandemic-era debt issuances are coming due within the next few years, prompting such companies to begin exploring ways to address such looming maturities. Given macroeconomic headwinds such as the high cost of capital and continued volatility in the capital markets, conventional debt and equity financings may not be opportune. Equity rights offerings represent a compelling, bespoke liability management alternative to traditional debt and equity financings. Although typically used by (i) debtors in Chapter 11 bankruptcy and (ii) foreign private issuers, equity rights offerings are becoming more common among distressed domestic issuers outside of bankruptcy due to the various advantages they provide. Despite their growing use outside of bankruptcy, equity rights offerings remain poorly understood.

This session will provide an overview of equity rights offerings involving distressed domestic issuers outside of bankruptcy, including considerations when structuring and executing such transactions, from the perspective of issuers and their counsel, including:

• Overview of Covid-19 era debt issuance trends and the looming maturity cliff (5 minutes)
• Overview of liability management and conventional liability management structures (5 minutes)
• Overview of equity rights offering structure and key features (5 minutes)
• Historical use of equity rights offering structure and current trends (5 minutes)
• Discussion of key advantages and disadvantages (5 minutes)
• Overview of preparation and planning for equity rights offerings (10 minutes)
• Building the right team of legal advisors and working with non-legal advisors (5 minutes)
• Key capital structure considerations (10 minutes)
• Best practices (10 minutes)

Who Should Attend: In-house counsel, outside attorneys and other allied professionals participating in liability management transactions

Program Level: Update

Prerequisites: None

Advanced Preparation: None

Faculty:

Keerthika M. Subramanian

Winston & Strawn LLP