What is the difference between Rule 144A and Regulation S?

Rule 144A lets a bond be resold in the United States to qualified institutional buyers without SEC registration. Regulation S covers offers and sales made outside the United States to non-US persons. Many high-yield and emerging-market bonds are issued in both forms at once, as separate 144A and Reg S tranches with their own identifiers.

What kind of restriction does make a bond fail Transferable?

A contractual, statutory or regulatory restriction that actually prevents transfer to institutional investors and is not one of the disregarded kinds. A clause requiring the issuer’s prior written consent to any transfer is the typical example.

Does Transferable apply to loans?

No. Transferable applies to obligations other than loans. Loans are tested under the Assignable Loan and Consent Required Loan characteristics instead, when the trade specifies them.

Rule 144A vs Reg S bonds, and CDS deliverability

Rule 144A vs Regulation S at a glance

Both are ways to sell a bond without registering it with the SEC. Rule 144A covers resales to large institutions inside the United States; Regulation S covers sales outside it. A typical high-yield deal is “144A/Reg S”: the same notes are issued in two tranches, one for each route, with separate identifiers.

	Rule 144A	Regulation S
What it is	A safe harbour for resales of unregistered securities	A safe harbour for offers and sales outside the United States
Who can buy	Qualified institutional buyers (QIBs), broadly institutions that invest at least $100 million in securities	Non-US persons, in offshore transactions
Where it usually settles	DTC	Euroclear and Clearstream
Selling into the US	Allowed, to other QIBs	Restricted during the distribution compliance period, usually 40 days for debt
Retail investors	No	Not in the US; elsewhere depends on local rules
For the CDS Transferable test	The resale restriction is disregarded	The resale restriction is disregarded

For a credit default swap the two tranches are treated alike. The rest of this guide explains why.

The short answer

A bond sold under Rule 144A, or offshore under Regulation S, carries resale restrictions under US securities law. Read literally, that could look like a “statutory or regulatory restriction” on transfer. The 2014 ISDA Credit Derivatives Definitions address this directly: restrictions that make a bond eligible for resale under Rule 144A or Regulation S, and restrictions with similar effect under the laws of other jurisdictions, are not counted as restrictions for the Transferable characteristic.

So a 144A or Reg S bond is not excluded for that reason alone. It still has to meet every other characteristic the trade lists.

What Transferable requires

An obligation has the Transferable characteristic when it can be transferred to institutional investors without any contractual, statutory or regulatory restriction, subject to the carve-outs below. Three features of the test matter in practice:

The audience is institutional investors. The question is not whether anyone at all can buy the bond, but whether institutions can.
It applies to obligations other than loans. Loans are assessed under Assignable Loan and Consent Required Loan, when those are specified.
It is one characteristic among several. On standard corporate trades it sits alongside Not Subordinated, Specified Currency, Maximum Maturity and Not Bearer.

Restrictions the Definitions disregard

In paraphrase, the 2014 Definitions do not treat the following as restrictions for this purpose:

restrictions that provide for eligibility for resale under Rule 144A or Regulation S, and equivalent restrictions under other jurisdictions’ laws;
restrictions on permitted investments, such as statutory or regulatory limits on what insurance companies and pension funds may hold; and
restrictions on transfer during blocked periods around payment dates or voting periods.

Restrictions that do matter

Other contractual restrictions can still exclude a bond. The clearest is a clause under which the notes may not be transferred without the issuer’s prior written consent. A consent requirement is a contractual restriction on transfer to institutional investors, and none of the carve-outs covers it.

Less clear-cut language needs reading in context: limits on the classes of permitted holders, transfer conditions in private placements, or restrictions added by a later amendment. Whether such a clause restricts transfer to institutional investors is a question of interpretation, and it should be treated as one, not assumed away.

How CDSBench tests it

Mastermind searches the indenture for explicit transfer language: free-transferability wording on one side, and prior-consent or “may not be transferred” wording on the other. Rule 144A and Regulation S legends are disregarded, as the Definitions provide. When no restricting clause exists anywhere in the documents, the result says it rests on that absence rather than on a cited clause. Ambiguous wording is marked for review, and loans are routed to review because the loan characteristics are not tested yet.

For the full list of characteristics, see What is a Deliverable Obligation?

In practice

Rite Aid and New Fortress Energy: 144A notes that were deliverable

Both secured notes were sold under Rule 144A and Regulation S. Rite Aid’s 2020 indenture provides for a Rule 144A global security and a Regulation S global security for the 8.000% Senior Secured Notes due 2026. New Fortress Energy’s 2021 indenture requires the company to furnish Rule 144A information for as long as the notes are not freely transferable under the Securities Act, so the notes carried Securities Act resale restrictions.

Neither indenture contains a clause requiring the issuer’s consent to a transfer. With the Rule 144A and Regulation S restrictions disregarded, both notes pass Transferable. Dean Foods’ 6.500% Senior Notes due 2023 also pass, on the same absence of a restricting clause.

Read the case: Rite Aid Corporation 2023 →Read the case: New Fortress Energy 2025 →Read the case: Dean Foods Company 2019 →

Common questions

What is the difference between Rule 144A and Regulation S?: Rule 144A lets a bond be resold in the United States to qualified institutional buyers without SEC registration. Regulation S covers offers and sales made outside the United States to non-US persons. Many high-yield and emerging-market bonds are issued in both forms at once, as separate 144A and Reg S tranches with their own identifiers.
Does a Rule 144A or Regulation S legend make a bond fail Transferable?: No. Under the 2014 ISDA Credit Derivatives Definitions, restrictions that provide for eligibility for resale under Rule 144A or Regulation S, and restrictions with similar effect under other laws, are not treated as transfer restrictions for the Transferable characteristic.
What kind of restriction does make a bond fail Transferable?: A contractual, statutory or regulatory restriction that actually prevents transfer to institutional investors and is not one of the disregarded kinds. A clause requiring the issuer’s prior written consent to any transfer is the typical example.
Does Transferable apply to loans?: No. Transferable applies to obligations other than loans. Loans are tested under the Assignable Loan and Consent Required Loan characteristics instead, when the trade specifies them.

This guide paraphrases CDSBench’s reading of the 2014 ISDA Credit Derivatives Definitions. The Definitions, the transaction’s confirmation and any Credit Derivatives Determinations Committee resolution govern. Decision support, not legal advice or a Credit Event determination.

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Rule 144A vs Regulation S: is the bond deliverable into CDS?