Sent: Wednesday, February 15, 20121:41 PM
To: Verne,B. Michael
Subject: Questions regarding 802.63
Mike, thanks for takingthe time to walk through my fact pattern over the phone. I've summarized ourdiscussion below and would appreciate if you could confirm your agreement.
-In connection with abona fide debt workout, the following steps will take place:
(1) Certain creditors holding Senior Secured Notes ofa Debtor in bankruptcy are forming a Holdco LLC, in which no person will havethe right to 50% or more of the profits, or assets upon dissolution. Theparticipating creditors will each contribute Senior Secured Notes to Holdco LLCin exchange for a pro rata share (in accordance with their respective portionof the participating creditors' pre-announcement debt) of Holdco LLC's equityand Senior Convertible Notes of Holdco LLC. Holdco LLC will in turn contributethe Senior Secured Notes to a newly-formed Opco LLC (to be wholly owned byHoldco LLC).
(2)Opco LLC will acquire, in a transaction covered by Section 363(b) of theBankruptcy Code, substantially all of the assets of Debtor and its subsidiariesand assume certain liabilities of Debtor and its subsidiaries, in exchange for(i) the extinguishment of the Senior Secured Notes, and (ii) an additional cashpayment of $X million.
(3)Certain of the equity holders of Holdco LLC will also provide new term loans toOpco LLC, for which they will receive New Opco Notes.
- All of the equityholders of Holdco LLC were creditors of Debtor prior to the bankruptcyannouncement, in bona fide credit transactions entered into in the ordinarycourse of business.
- The value of the cashpayment to Debtor of $X million plus the value of the assumed liabilities mayexceed $68.2 million at closing, and the transaction will close on or afterFebruary 27, 2012.
You have advised us that,under the foregoing scenario, no HSR filing is required on the basis that allof the consideration set forth in Step (2) is exempt under 802.63 as part ofthe overall debt workout. [Step 1 is a non-reportable formation, as no personis acquiring control of Holdco LLC. Step 3 should not be subject to the HSRAct, regardless, but I've mentioned it for the sake of completeness.]Therefore, no valuations need to be made with respect to the additional cashpayment, the assumed liabilities, or the fair market value of the purchasedassets for purposes of determining whether the size-of transaction test is met.