Derek Jeong
@youngman102
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Covenants: The Proliferation of Serta Simmons' Super-Priority Uptier Exchange (Sept. 29, 2020)

Reorg Radio

Unrestricted Subsidiary Transfers and Preventing Future Transactions

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Companies may shift collateral to unrestricted subsidiaries to avoid negative covenants and freely utilize the collateral. However, this results in reduced collateral available to lenders. Lenders can prevent such transactions by requiring all lender consent for amendments subordinating liens or by setting guidelines for open market purchases. By implementing these measures, lenders can safeguard their interests and prevent future transactions that may impact their claims on collateral.

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