SEC Issues No-Action Letter Permitting Reliance Upon Section 3(a)(9) in Exchanges of Securities with Upstream Guarantees

January 13, 2010

Today, the staff of the Division of Corporation Finance (the "Staff") of the Securities and Exchange Commission issued a no-action letter to Davis Polk, Cleary Gottlieb and O'Melveny & Myers permitting reliance upon Section 3(a)(9) of the Securities Act of 1933 for the issuance of a new parent security in exchange for an outstanding parent security that has one or more "upstream" guarantees from the parent's 100%-owned subsidiaries (the "3(a)(9) Upstream Guarantee Letter").  All of the prior Staff no-action positions involving the availability of Section 3(a)(9) for exchanges of guaranteed securities had involved "downstream" guarantees (i.e., situations where the parent guaranteed a security issued by one or more of its subsidiaries) as opposed to "upstream" guarantees.


As a result of the 3(a)(9) Upstream Guarantee Letter:

  • issuers of securities with upstream guarantees will not be required to keep a shelf registration statement effective for the life of the outstanding convertible security to cover exercises and
  • issuers of securities with upstream guarantees will have an attractive third option for effecting exchange offers in addition to registration (which has timing implications) and relying on a private placement exemption (which limits the potential offerees).

See the 3(a)(9) Upstream Guarantee Letter


See the no-action request letter


If you have questions regarding this newsflash, please call any of the lawyers listed below or your regular Davis Polk contact.

Richard D. Truesdell, Jr. 212 450
John M. Brandow212 450
Ray Ibrahim212 450
Michael Kaplan 212 450 4111
Mark M. Mendez212 450
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