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This episode discusses Lycra's unique variant of the drop-down mechanism and its last-minute refinancing of its 2023 notes. The podcast explores how Lycra used intellectual property to create a new SPV and pledged assets outside the restricted group as collateral. It also analyzes the impact of the new transaction on existing bondholders and their capacity to make restricted payments or secure debt.
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Quick takeaways
- Lycra's last-minute refinancing of its 2023 notes demonstrates innovative liability management techniques in drop-down transactions.
- Lycra's unique drop-down transaction involved placing intellectual property assets outside the group while incurring new debt within, creating a new SPV with better position and claim over the assets.
Deep dives
Recap of Lycra's Refinancing Proposals
Lycra has been working on refinancing its notes since Q3 last year. The ad hoc group of bondholders proposed taking over 100% of Lycra's equity and offering $50 million of new money to pay down its outstanding RCF. They also proposed raising exit financing in the form of a bond or loan maturing in 2028 or $450 million worth of takeback debt. The counter-proposal from Lycra involved raising a $535 million bond maturing in 2028 and writing off the 2023 and 2025 notes in exchange for a pro-rata allocation of the 2028 notes and 44% of pro-forma equity. However, no agreement was reached, and talks broke down.
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