Poison Put Provisions in Debt Financing: Lessons on Enforceability From Recent Cases

Navigating Change-in-Control Provisions That Protect Against Shareholder Activists and Hostile Takeovers

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, February 4, 2015

Recorded event now available

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Program Materials

This CLE webinar will discuss the evolving use of poison put provisions in debt financings, various forms of poison put scenarios and the recent case law developments on the enforceability of these provisions.

Description

Poison put provisions are commonplace in debt financings.  They are change of control provisions in credit agreements and bond indentures that give debt holders a put right in the event of a turnover in the majority composition of a company’s board of directors.  Initially used to protect debt holders, poison puts have been increasingly used by companies to ward off shareholder activists by using the threat of a debt default to solicit votes in favor of the incumbent board.

Courts have long struggled with how to deal with these provisions, balancing the need for debt holders to know who they are dealing with against the rights of shareholders to have a say in board composition.

Poison put provisions were tested in the recent Delaware case involving a shareholder suit against Healthways and its lender regarding a “dead hand” poison put triggered if the directors were replaced, even with company approval. The court indicated the poison put was particularly onerous and allowed the suit to proceed to determine whether the company and its lender “knowingly” put forth the poison put.

Listen as our authoritative panel of practitioners discusses the use of poison put provisions in debt financings, various forms of poison puts and recent case law developments on the enforceability of these provisions.

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Outline

  1. Evolving use of poison put provisions in debt financings
  2. Various forms of poison put scenarios
  3. Case law developments on the enforceability of poison put provisions

Benefits

The panel will review these and other key issues:

  • How has the use of poison puts in debt financings evolved in recent years?
  • What are the various forms of poison puts to address a change in control of the board?
  • How have courts addressed the enforceability of poison put provisions?

Faculty

Kai Haakon E. Liekefett
Kai Haakon E. Liekefett

Partner
Vinson & Elkins

Mr. Liekefett is the head of Vinson & Elkins’ Shareholder Activism Response Team and a corporate partner with...  |  Read More

Muir Paterson
Muir Paterson
Managing Director
Goldman Sachs & Co.

Mr. Paterson is a senior member of the Mergers & Acquisitions Group, focused on advising clients...  |  Read More

David W. Wicklund
David W. Wicklund

Partner
Vinson & Elkins

Mr. Wicklund's practice focuses primarily on complex acquisition and leveraged financings. He has experience...  |  Read More

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