To amend the Trust Indenture Act of 1939 to require that indentures prohibit corporate acquisitions or reorganizations unless the successor corporation assumes the responsibility to make payments under the indenture.

SECTION 1. FINDINGS.

    The Congress finds that--
            (1) interstate public offerings of debt securities by 
        corporations and other entities that are registered under 
        Federal securities laws are required to be covered by a trust 
        indenture meeting the requirements of the Trust Indenture Act 
        of 1939 (``1939 Act'');
            (2) a trust indenture is a contractual agreement between 
        the issuer of the debt securities and a financial institution 
        as trustee for the benefit and protection of public 
        debtholders;
            (3) a trust indenture under the 1939 Act sets forth certain 
        responsibilities and rights of the issuer and the trustee, 
        including the obligation of the issuer to make payment of 
        interest and principal on the debt securities to debtholders, 
        and it sets forth events of default which can trigger actions 
        by the trustee on behalf of the debtholders to have the default 
        cured or to otherwise obtain payment for debtholders;
            (4) the 1939 Act does not, however, contain provisions that 
        would require a successor corporation to the issuer resulting 
        from a merger, consolidation, sale of substantially all of its 
        assets, share exchange or other transaction having 
        substantially equivalent effect, to assume payment 
        responsibility for the predecessor/issuer's debt securities;
            (5) sample trust indenture provisions set forth in sections 
        801 and 802 of the American Bar Foundation's Model Debenture 
        Indenture Provisions (``ABF Model Indenture'', approved and 
        adopted in 1967) for registered public offerings of debt 
        securities attempt to deal with the ``successor responsibility 
        for payment'' situation, but fail to specifically cover ``share 
        exchanges'' (which are types of corporate reorganization 
        transactions developed subsequent to 1967) or ``equivalent 
        effect'' transactions;
            (6) issuers of debt securities are not currently required 
        to include in their trust indentures any section dealing with 
        the ``successor liability for payment'' situation, inasmuch as 
        inclusion of the ABF Model Indenture provisions on that 
        subject, in whole or in part, is voluntary by the issuer;
            (7) certain issuers of debt securities to the public in 
        registered offerings have engaged in share exchange 
        transactions (that are substantially equivalent to mergers), 
        with successor corporations, where such issuers have sought to 
        avoid successor payment responsibility on the debt securities 
        on the premise that the language of their trust indenture 
        provisions regarding successor payment responsibility does not 
        specifically cover share exchanges nor state that such sections 
        would be applicable to any other transactions having effects 
        substantially equivalent to a merger, combination, or sale of 
        substantially all the issuer's assets; and
            (8) it is appropriate and necessary for the protection of 
        public purchasers of debt securities in publicly registered 
        offerings under the Federal securities laws that trust 
        indentures relating to such debt securities be required under 
        the 1939 Act to have successor payment responsibility 
        provisions, and that such provisions be drafted with language 
        that is both complete and flexible in order to assure that a 
        successor to an issuer of debt securities resulting from a 
        merger or equivalent transaction cannot avoid payment 
        responsibility that would disastrously injure public 
        debtholders.

SEC. 2. AMENDMENT TO THE TRUST INDENTURE ACT OF 1939.

    The Trust Indenture Act of 1939 is amended by adding after section 
328 (15 U.S.C. 77bbbb) the following new section:

           ``merger, consolidation, conveyance, or transfer.

    ``Sec. 329. (a) Conditions on Transaction.--An issuer of any 
security subject to this title shall not consolidate with or merge into 
any other corporation or convey or transfer its properties and assets 
substantially as an entirety to any person, or engage in any equity or 
share exchange transaction with any other person or with the security 
holders of any other person which results in a reduction of the assets 
available to the issuer, or engage in any other transaction having a 
substantially equivalent effect, unless--
            ``(1) the corporation formed by such consolidation or into 
        which the issuer is merged or the person which acquires by 
        conveyance or transfer the properties and assets of the issuer 
        substantially as an entirety, or the person which acquires the 
        shares of the issuer or whose equity holders acquire such 
        shares, in a transaction which results in a reduction of the 
        assets available to the issuer, shall be a corporation 
        organized and existing under the laws of the United States of 
        America or any State or the District of Columbia, and shall 
        expressly assume, by an indenture supplemental hereto, executed 
        and delivered to the trustee, in form satisfactory to the 
        trustee, the due and punctual payment of the principal of (and 
        premium, if any) and interest on all the securities and the 
        performance of every covenant of the indenture on the part of 
        the issuer to be performed or observed;
            ``(2) immediately after giving effect to such transition, 
        no event of default, and no event which, after notice or lapse 
        of time, or both, would become an event of default, shall have 
        happened and be continuing; and
            ``(3) the issuer has delivered to the trustee an officers' 
        certificate and an opinion of counsel each stating that such 
        consolidation, merger, conveyance, transfer, equity or share 
        exchange transaction, or transaction having a substantially 
        equivalent effect, and such supplemental indenture comply with 
        this article and that all conditions precedent herein provided 
        for relating to such transaction have been complied with.
    ``(b) Rights and Obligations Under Indenture of Successor 
Corporation.--Upon any consolidation or merger, or any conveyance or 
transfer of the properties and assets of the issuer substantially as an 
entirety, or equity or share exchange transaction described in 
subsection (a), or any transaction having a substantially equivalent 
effect, in accordance with subsection (a), the person subject to 
subsection (a)(1) shall succeed to, and be substituted for, and may 
exercise every right and power of, the issuer under the indenture with 
the same effect as if such successor corporation had been named as the 
issuer: Provided, however, That no such consolidation, merger, 
conveyance, transfer, or equity or share exchange or other transaction 
shall have the effect of releasing the issuer, or any successor 
corporation which shall have become a successor by operation of this 
section from its liability as obligor and maker on any of the 
securities.''.

Summary: Amends the Trust Indenture Act of 1939 to prohibit certain corporate mergers, consolidations, conveyances, or transfer transactions by the issuer of federally registered debt securities in which the assets available to the issuer are reduced, unless the successor entity expressly assumes, by a supplement to the original trust indenture, the payment of interest and principal of all the securities involved and the performance of every covenant of the predecessor's indenture. Declares that subsequent to such transactions: (1) the successor corporation shall succeed to, and exercise every right and power of, the original issue under the indenture. And (2) neither the predecessor corporation, nor its successor, shall be released from its liabilities as obligor or maker on its respective securities.