The current credit crisis and worldwide recession, coupled with a substantially frozen market for new high yield debt issuances, has led to a significant number of current and prospective defaults by issuers of high yield debt. A number of companies have failed to pay interest on their debt, while others have defaulted on principal payments at maturity. This trend is expected to continue in 2009 and possibly beyond.
As the credit crisis continues, companies need to anticipate issues they may face as cash flow declines and debt comes due, particularly if refinancing options are not available. Issuers of debt securities have recently been turning to exchange offers both as a substitute for refinancings and in order to restructure their balance sheets and obtain some relief from debt service requirements.
This article discusses certain aspects of exchange offers that may be useful to issuers contemplating a debt restructuring.
Originally a Dorsey & Whitney publication, the article "Exchange-Offer Alternatives for Issuers of Debt Securities" was published in the February 10, 2009 issue of Andrews Litigation Reporter: Securities Litigation & Regulation. The Practical Law Company also ran an article, "Debt Exchanges: Companies Adapt to Continued Restrictions in the Credit Market," using Ted Farris as a resource.