This day

Accredited
defined under SEC Rule 501 of Regulation D, this refers to people and entities that are permitted to buy Securities in a Private Placement. The term covers virtually all the types of institutions that are participants in the Private Placement market, and also includes people who are either rich or sophisticated. It is, of course, better to be both rich and sophisticated, but one will do for Regulation D purposes.

Beige Book
an informal name for a report published by the Federal Reserve Board eight times a year. The report is a collection of current economic conditions and is gathered by the Federal Reserve Bank in each of the 12 districts and is based on sources such as bank and branch director reports and expert interviews. An overall summary is prepared by a designated Federal Reserve Bank on a rotating basis.

See Latham & Watkins at http://www.lw.com

a type of written document that the SEC made available as part of Securities Offering Reform. FWPs are short-form written Prospectuses that are typically used to supplement previously disclosed information. FWPs are an efficient means of disclosing additional information because they are not subject to the strict form and content requirements of full statutory Prospectuses. In most but not all cases, FWPs need to be filed with the SEC concurrently with first use. See Latham & Watkins publication: Christmas in July—the SEC Improves the Securities Offering Process (August 2005), available at http://www.lw.com.

the undertaking by a party (the “surety”) to be liable for the debts or other obligations of another party. The terms surety and Guarantor are often used interchangeably and a Guarantor is a type of surety under the UCC. Technically speaking, when the secondary obligor is directly liable under a three-party contract with the primary obligor and the obligee, such contract is considered a Suretyship contract, whereas if the secondary obligor is liable under a two-party contract with the obligee, with the primary obligor being obligated to the obligee separately, such contract is considered a Guarantee. A “Suretyship defense” is a defense under which a surety or Guarantor claims that it is no longer liable under its secondary obligations due to changes to the underlying obligation between the obligee and the primary obligor.

subsidiaries or parent entities that Guarantee the debt incurred by the Issuer or Borrower. See Guarantee. In Commitment Letters, both the Senior Secured Credit Facilities and the Bridge Facilities will usually have the same Guarantors, which will be described in the Term Sheets. Generally, Credit Facilities are Guaranteed by all domestic subsidiaries and any parent holding companies of a US Issuer or Borrower. For tax reasons, foreign subsidiaries of the Issuer or Borrower generally do not Guarantee the domestic Credit Facilities. See Deemed Dividend.

see Fitch, Moody’s and S&P. Ratings Agencies rate companies, Securities and loans on a risk spectrum. The ratings received will directly impact the cost of borrowing. As a result, the Ratings Agencies are feared by companies and bankers alike.

a special type of purchase Option named in honor of the Green Shoe Company—the first Issuer to have this provision. Green Shoe is the nickname for the Over-Allotment Option granted to the Underwriters in the Underwriting Agreement. The Green Shoe is an Option, typically for up to 30 days, to allow the Underwriters to purchase up to 15 percent (a Cap imposed by FINRA rules) more shares than the original number sold by the Issuer in the offering. The purchase price per share for exercising the Green Shoe is the same price as in the related offering. The Green Shoe provides protection that allows Underwriters to “over-allot,” meaning to sell more shares than the number being sold in the offering. The Underwriters can later use the Green Shoe to cover the Syndicate Short Position created by the Over-Allotment sales if the Option price is less than the then prevailing market price per share. Underwriters generally use the Over-Allotment Option when demand for a Security proves higher than expected and therefore it is too expensive to buy additional shares back in the open market to cover the Syndicate Short Position. Also referred to as “the Shoe.” Note the 15 percent Cap does not apply to 144A Offerings. See Naked Short and Refreshing the Shoe.

the trip around the country (or around the world), often on private jets, that Issuers and bankers (but not lawyers) go on in order to meet with potential purchasers of the Securities being offered. This is the heart of the marketing process in a Securities offering. See also One on Ones.

the situation where the Underwriter has covered part or all of its Syndicate Short Position through open market repurchases and then shorts the stock again up to the full amount of the Over-Allotment Option. Consider the example provided in the definition of Naked Short. There is an IPO for 1.0 million shares of ABC, with an Over-Allotment Option for 150,000 additional shares. This time, the Underwriter commits to provide to accounts 1.15 million shares. The stock initially drops, and so rather than exercising the Green Shoe, the Underwriter buys a portion of the 150,000 shares on the open market (because they are cheaper on the open market than through the Over-Allotment Option, which is at the offering price less the Underwriting Discount). Then the stock price rises above the initial offering price. The Underwriter then Refreshes the Shoe, meaning the Underwriter immediately sells (or Shorts) the shares it purchased at the lower price in the open market—and meaning the Underwriter is again dependent on the Over-Allotment Option to cover the extra 150,000 shares that were allocated.

a financial statement on which a company reports its results of operations over a period of time (usually monthly, quarterly or annually). Also commonly referred to as a Profit and Loss Statement or P&L Statement. Think of an Income Statement as a movie and a Balance Sheet as a snapshot. See Balance Sheet.


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