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91 Colum. L. Rev. 846 (1991)
Debt Tender Offer Techniques and the Problem of Coercion

handle is hein.journals/clr91 and id is 860 raw text is: NOTES DEBT TENDER OFFER TECHNIQUES AND THE PROBLEM OF COERCION INTRODUCTION Recently, as part of the deleveraging of corporate America,1 cor- porate issuers have turned to debt tender offers as a way to eliminate the highly leveraged, risky capital structures created during the 1980s. Most of the issuers that recently have launched tender offers for their own debt had been, only a few years before, the subjects of highly leveraged acquisitions or leveraged buyouts (LBOs), or had insti- tuted extensive restructuring plans. While the precarious financial po- sitions now facing these corporations cannot always be traced directly to the leveraging of the eighties, it is fair to postulate that many of the managers were overly optimistic with respect both to their companies' abilities to perform and to the future economic environment of this country. Managers left little room for error, and unforeseen events, including a weaker economy, labor disputes, and the like, have pushed many of these companies to the verge of bankruptcy. In an effort to avoid this fate,2 corporations are seeking to retire their most expensive debt issues-their junk bonds. A number of commentators and practitioners have assailed as un- fairly coercive various techniques that issuers have used in their efforts to retire highly leveraged debt,4 and have presented powerful legal ar- guments against these techniques. Part I of this Note describes some of these so-called coercive techniques and why they are disfavored by some. It also reviews the case law, all of which has upheld the legality of these techniques. Part II focuses on the three most plausible legal arguments raised to attack coercive techniques and concludes that, with one possible exception, these arguments are inadequate and sup- ported by questionable empirical and policy assumptions. Part III ana- l. Coffee, Coercive Debt Tender Offers, N.Y.Lj., July 19, 1990, at 5, col. 1. 2. While it is possible that these offers are launched for purposes less worthy than avoiding bankruptcy, this Note will argue that, in general, warnings in the prospectuses of imminent financial disaster are credible, and that the corporations honestly are seek- ing to avoid such disaster. See infra notes 253-256, 260-268 and accompanying text. This argument is supported by the fact that the securities laws prohibit the use of manip- ulative and deceptive devices. See, e.g., Securities Exchange Act of 1934, 15 U.S.C. § 578(b) (1988). In addition, the Note will assume no malfeasance on the part of man- agement in connection with the original LBO or restructuring. 3. Although there are technical differences, the terms bond, debt, and deben- ture will be used interchangeably here, since none of these differences bears on the subject of the Note. 4. See, e.g., Coffee, supra note 1, at 5, col. 1; Stein, Insult to Injury: Junk Holders Get Offers They Should, but Can't Refuse, Barron's, May 28, 1990, at 42, col. 1. 846

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