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Podcast hosts Alice Holian and Olivia Mantock cover the ins and outs of J Crew blockers, exploring their strengths, weaknesses, and limited scope. They discuss the importance of strong formulations and analyze bond deals utilizing the J Crew blocker as a protective provision for material assets.
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Quick takeaways
- J Crew blockers in loan documents may have limitations in covering all types of assets, such as non-material intellectual property and restricted payments, which affects their effectiveness.
- Recent formulations of J Crew blockers have been stronger, including provisions that apply to assets outside the restricted group and expanded coverage of material assets.
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Weaknesses in J.K.R.U. blockers
One of the common weaknesses in J.K.R.U. blockers is that they are typically limited to material intellectual property (IP), which may not cover other types of assets. For example, the COVID's farm case had a J.K.R.U. blocker limited to material patterns, which only covered five products making up a significant portion of revenue. However, one of those products was losing market share due to competition and had an expiring patent. Additionally, some J.K.R.U. blockers only cover permitted investments (PI) instead of all restricted payments (RP), which could limit their effectiveness. The strength of the blocker and the availability of RP and PI capacity can vary, with some formulations showing deterioration in loan documents.
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