Addressing Value Leakage in Retail Companies

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This chapter explores potential measures to address value leakage in retail companies, such as restricting IP transfers, capping investments in subsidiaries, and implementing maintenance tests. The speakers discuss examples of value leakage and investor reactions, as well as the amendments made in Allied Universal bonds to protect bondholders. They also examine the process of designating subsidiaries and the broadness of credit document baskets.

On this week’s podcast our Americas Core Credit team replays our Covenants 101 webinar from earlier in the year discussing sources of potential value leakage. Topics include an overview on value leakage, including dividends, transfers to nonguarantor restricted subsidiaries and transfers to unrestricted subsidiaries, discussions on previous transactions done by PetSmart, J.Crew, Claire’s and Neiman and demonstrating how to calculate value leakage in debt documents. If you are not a Reorg subscriber, request access here: go.reorg-research.com/Podcast-Trial