Question: As a condition to not objecting to a registration statement for a so-called “Exxon Capital” exchange offer, the staff will ask the issuer to make representations about the absence of a distribution of the securities received in the exchange. Is there a particular form that these representations must take?

Answer: In a series of letters beginning with Exxon Capital Holdings Corporation (April 13, 1988), the staff expressed its view that when an issuer that has privately sold non-convertible debt or certain other securities to large, sophisticated investors, the issuer may subsequently register the exchange of those securities for substantially similar securities (an “Exchange Offer”), and the new securities (the “Exchange Securities”) may then be resold by most holders without further registration and without the delivery of a prospectus. A premise upon which this so-called “Exxon Capital” or “A/B” exchange is based is that the participants will not be engaged in a distribution of the registered securities, lest they be underwriters. As a condition to it not objecting to the registration of these offerings, the staff has requested that issuers make certain representations. See Morgan Stanley & Co., Inc. (June 5, 1991) and Shearman & Sterling (July 2, 1993). Over time, the staff has observed some variation in representations that are being provided. These representations need not follow any particular form so long as they address the following essential matters:

In the Shearman & Sterling letter, the staff’s views were conditioned on the issuer making each person participating in the Exchange Offer aware that any broker-dealer acquiring Exchange Securities in exchange for securities it acquired for its own account as a result of market-making activities or other trading activities may be a statutory underwriter. If the representations clearly state the essential matters outlined above, the staff does not believe that this additional disclosure is necessary. Any person acquiring Exchange Securities with a view to distributing them must be identified as an underwriter in the prospectus and must comply with all applicable requirements. In addition, a broker-dealer acquiring Exchange Securities may be required to deliver a prospectus in connection with resales if it is relying on the exemption in Section 4(a)(3) of the Securities Act.

The staff believes that the representations may be provided either in the prospectus or in correspondence submitted in connection with the filing. [July 11, 2016]