1908005 Informal Interpretation

Date:

Tags:

Rule:
801.10
Staff:
Nora Whitehead
Response/Comments:

You cannot deduct the repayment of debt in an asset acquisition. This is the case regardless of whether the target has secured the debt.

Question

From: Whitehead, Nora


Sent: Thursday, August 22, 2019 1:20:09 PM (UTC-05:00) Eastern Time (US & Canada)


To: [Redacted]


Cc: [Redacted]


Subject: RE: HSR Debt Question

You cannot deduct the repayment of debt in an asset acquisition. This is the case regardless of whether the target has secured the debt.

From: [Redacted]


Sent: Thursday, August 22, 2019 10:28:51 AM (UTC-05:00) Eastern Time (US & Canada)


To: [Redacted]


Cc: [Redacted]


Subject: HSR Debt Question

We are writing to seek clarification about your February 16, 2017 update to Informal Interpretation 1211011. The update states that “the PNO’s current position is that the repayment of debt may be deducted from the acquisition price only where the debt is held by, or secured by, Target.” Our question is about what it means for a debt to be "secured by[] Target.” Does it include debt secured by purchased assets in an acquisition of assets?

For example, assume that Company A is acquiring assets from Company B and Company B used a portion of the target assets as collateral to secure a $30 million debt. Company A will buy the assets for $110 million, $30 million of which will be used to pay off debt secured by the assets. In this example, the debt being paid off belongs to Company B, the seller of the target assets, but the target assets being bought were used to secure the debt. In this scenario, would the transaction price be $80 or $110 million dollars?

Would the PNO treat this differently if the target assets used to secure the debt were acquired through a secured transaction subject to UCC Chapter 9?

 

 

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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