This chapter explores the potential ramifications of transferring unrestricted subsidiaries, including the loss of collateral and guarantees. It also discusses documentary protections that safeguard lenders from the Jacob maneuver.
The Covenants by Reorg team discusses how the J Crew Trapdoor could be a red herring and investors need to be alert even if it is not there, how the unrestricted subsidiaries maneuver(made infamous by J Crew) could be used for creative restructurings, recent examples of asset leakage to unrestricted subsidiaries and how investors can demand protection in documents.
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