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Date
Rule
802.63
Staff
Michael Verne
Response/Comments
Advised that this is not exempt under 802.63. Section 802.63 requires that the debt workout be in the context of a bona fide credit transaction. The SBP defines such a transaction as one in which the primary motivation is extending credit to the debtor (43 FR 33501). This does not appear to be consistent with a vulture fund which acquires debt with no genuine expectation of repayment.

Question

From: [redacted]
To: mverne@ftc.gov
Date: 2/21/02
Subject: HSR advice - 802.63

Hi Mike - Hope you are well. I am hoping for confirmation that the following transaction is exempt under 802.63

Company A is a vulture fund. It acquired 2/3 of the bonds of Company B, pre bankruptcy. Pursuant to a term sheet and a contemplated plan of reorganization, A has agreed to convert its bonds to equity and provide DIP financing during the bankruptcy period (which would later convert into equity). At the end of the reorganization process, A will own a majority of B. Please assume that the size of parties and size of transaction tests are met.

Thank you.

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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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