Transfers to Non-Guarantors Restricted Subsidiaries vs. Transfers to Unrestricted Subsidiaries

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This chapter discusses the distinction between transfers to non-guarantors restricted subsidiaries and transfers to unrestricted subsidiaries in credit agreements. It explores the risks and potential value leakage associated with both types of transfers, as well as the purpose and consequences of unrestricted subsidiaries. Examples of unrestricted subsidiary transfers are analyzed, including the impact they had on the subsidiaries involved.

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