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Exploring the J.Crew maneuver and its impact on liability management deals. The podcast discusses securitization baskets in credit agreements and the potential loopholes they create. It includes a case study on the Norska Skug transaction and highlights the complexities of securitizing intellectual property. The concerns about collateral and loose covenant terms in whole business securitization with intellectual property are also addressed.
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Quick takeaways
- The J.Crew maneuver set a blueprint for contentious liability management deals, sparking efforts to block similar transactions that strip and transfer valuable collateral away from lenders.
- Certain credit agreements have a potential loophole in the securitization basket language, allowing borrowers to securitize a wide range of assets, including intellectual property, potentially leading to legal disputes and the need for better language in credit agreements.
Deep dives
The Obsession with Finding the Next J. Crew
The obsession with finding the next J. Crew stems from the challenge faced by existing lenders during the J. Crew transaction. J. Crew took its valuable intellectual property and removed it from the collateral package of existing lenders, using it instead as collateral for new debt. This left existing lenders without collateral and primed by the new debt. People are fixated on finding similar contract loopholes that allow for these types of transactions.
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