Agree. K Walsh concurs.
Sent: Monday,March 18, 2013 4:40 PM
To: Verne, B. Michael
Subject:Acquisition by assumption of debt
I am writing to confirmthat, based on my understanding of the PNO's currenttreatment of the assumption/payoff of the debt of an acquiredentity by the acquiring person,the transaction describedbelow would not be reportable.
The transaction is structuredas follows:
Step 1: Company A plans to acquirean option to purchasesubstantially all of the equity interests in CompanyB from Option Holder. The acquisition of an option toacquire equity interestsis not, itself, an acquisition of non-corporate interests, and as such, Step 1 does not itselflead to a reporting obligation.
Step 2: Company A will exercise the optionacquired in Step 1 and will acquirefrom Company B substantially all equity interests in CompanyB. The exercise price for the Option is $100 million. In satisfaction of the exerciseprice of the Option:
1. Company A will assume$100 million in existing debt owed by Company B to Creditor(a third party) pursuant to Note 1 and CompanyA will execute a new promissory note in favor of Company B's Creditor;
2. Creditor will execute a waiver, release and novation,discharging Company B from its obligationto pay the existing $100 millionin principal under Note 1.
In addition, Company A will issue another promissory note to Creditorfor approximately $60 million insatisfaction of the balanceof Company B's current outstanding debt owed to Creditor.
Thus, as a result of the transaction, CompanyA will acquire substantially all equity interestsin Company B and Company B's current debt obligations with respect to Creditor will be assumedand/ or paid off by CompanyA's execution and deliveryto Creditor of two new promissory notes.I understand that, based upon InformalOpinions 1211011 and 0805010, any amount of CompanyB's debt assumedand/or paid by Company A should be excludedfrom the "acquisition price" for purposesof determining the value of d1e transaction. Because no additional consideration will be paid, the acquisition price and the resultant value of the transaction is $0, rendering the transaction non-reportable.