In light of the unprecedented changes to the economy as a result
of COVID-19, many parties to contracts are carefully considering
force majeure clauses, and whether such clauses permit
them to void contractual obligations. While most of the contracts
considered are supply agreements or other commercial contracts,
underwriting agreements in capital markets transactions include
similar clauses which could allow underwriters to terminate an
offering between pricing and closing.
Customarily, if markets are choppy or there is any kind of
extrinsic risk, pricing is simply cancelled or delayed. In other
cases where a deal can proceed, it is downsized or the price is
reduced. But what happens if a deal prices, and circumstances
change in the short window (normally two days for equity
offerings), between pricing and settlement? Below is a sample
termination provision from an underwriting agreement:
