The deals
J.Crew trademark "trap door" drop-down and IPCo notes exchange2016-2017 · drop-down to unrestricted subsidiary
In December 2016 and July 2017 J.Crew moved its U.S. trademarks, which secured roughly $1.5bn of term loans, through J.Crew Cayman (a non-loan-party restricted subsidiary) into IPCo, an unrestricted subsidiary, and licensed them back for a fixed $59m a year. The trademarks then backed $347m of new 13% secured notes, mostly issued to former unsecured PIK holders, putting structurally junior bondholders ahead of the term loan on the brand. A simple-majority amendment with 88% consent ratified the transfer and added a no-action clause, the 2019 appellate court barred most holdout claims, and J.Crew filed a prearranged Chapter 11 in May 2020 that converted about $1.65bn of debt to equity.
How it worked
- Step 1 (Dec 2016): J.Crew International, a loan party, transferred an undivided 72.04% interest in the U.S. J.Crew trademarks to J.Crew Cayman, a non-loan-party restricted subsidiary. This used the basket for loan-party investments in non-loan-party restricted subsidiaries (greater of $150m or 4% of total assets, plus the Available Amount) together with the general investment basket (greater of $100m or 3.25% of total assets, plus the Available Amount).
- Step 2 (the trap door): J.Crew Cayman passed the interest down to an unrestricted IP-holding subsidiary, which became J.Crew Domestic Brand, LLC (IPCo) under J.Crew Brand Holdings. This used Section 7.02(t), which let non-loan-party restricted subsidiaries invest in unrestricted subsidiaries with the 'proceeds' of investments they had received. The agreement never defined 'proceeds', so J.Crew treated the IP itself as proceeds.
- Once the trademarks sat in an unrestricted subsidiary, they were released from the term lenders' lien and IPCo was outside the covenants. IPCo licensed the brand back to J.Crew Operating Corp. for a fixed $59m a year ($42.5m for the 72.04% interest and $16.5m for the 27.96% interest), paid in March and September. Per the 10-Q, those payments are not subject to the credit facility or PIK note covenants.
- July 2017: J.Crew transferred the remaining 27.96% interest to IPCo, so IPCo owned 100% of the U.S. J.Crew IP.
- July 13, 2017 exchange: $565.7m of 7.75%/8.50% PIK toggle notes due 2019, which were unsecured holdco debt, were exchanged for $249.6m of 13% senior secured notes due 2021, $189.7m liquidation preference of 7% Series A preferred stock, and 15% of the parent's common stock.
- New money: $97.0m of additional 13% notes were sold at a 3% discount. The two note series were cross-collateralized on the IP: the exchange notes hold a first lien on the initial 72.04% interest and a second lien on the additional 27.96%, and the new money notes hold the reverse. Guarantors were IPCo, J.Crew Brand Intermediate and J.Crew International Brand. Together the series total $347m of notes ranking ahead of the term loan on the trademarks.
- Term loan amendment: $150.5m of term loans was repaid, funded by $94.1m of new-money note proceeds, $29.4m of new sponsor term loans (12%, with 3% paid in kind) and $27.0m of cash. Consenting lenders (88%) got a 22bp higher margin and more amortization. The amendment told the agent to dismiss the IP litigation and added a no-action clause.
Baskets used
- General investment basket, Section 7.02: greater of $100m or 3.25% of total assets, plus the Available Amount. It could be used for investments in unrestricted subsidiaries and did not limit the type of asset.
- Investments by loan parties in non-loan-party restricted subsidiaries: greater of $150m or 4% of total assets, plus the Available Amount.
- Section 7.02(t), the non-loan-party investments basket or 'trap door': non-loan-party restricted subsidiaries could invest in unrestricted subsidiaries with the proceeds of investments made under the intercompany basket, with no separate cap.
- Undefined term 'proceeds': the IP itself was treated as proceeds of the intercompany investment.
- Unrestricted subsidiary designation: assets moved to an unrestricted subsidiary leave the collateral and the covenant group.
- Amendment threshold: the ratifying amendment and the no-action clause needed only a simple majority (Required Lenders). Only a transfer of all or substantially all collateral needed unanimous consent.
What creditors lost
Term lenders (about $1.5-1.57bn of term loans) lost their lien on the U.S. J.Crew trademarks, the company's core asset. J.Crew valued the first 72.04% interest at about $250m, and 100% of the IP was gone by July 2017. That IP then secured $347m of 13% notes held mainly by former unsecured PIK noteholders, who moved ahead of the term loan on the brand and were paid from a $59m-a-year royalty that sits outside the lenders' covenants. Former PIK holders swapped $565.7m of unsecured claims for $249.6m of secured notes plus preferred and common equity. Consenting term lenders (88%) took a $150.5m paydown and a 22bp margin increase in exchange for approving the transfer and giving up the agent's lawsuit. The roughly 12% holdouts (Eaton Vance, Highland) were bound by the majority amendment and its no-action clause. In the 2020 Chapter 11, about $1.65bn of debt was converted to equity. The sponsors were wiped out and lenders including Anchorage, GSO and Davidson Kempner took ownership.
Outcome
J.Crew's own declaratory suit against the agent (WSFS) was dismissed with mutual releases on July 17, 2017, under the amendment. Eaton Vance and Highland sued on June 22, 2017, for breach of contract, a defective amendment and fraudulent conveyance. A New York judge let the restructuring go ahead. On April 25, 2019, the First Department held that the amendment's no-action clause barred every claim except breach of contract claims that all or substantially all collateral was transferred without unanimous approval (Eaton Vance Mgt. v. WSFS, 171 A.D.3d 626). J.Crew (Chinos Holdings) filed a prearranged Chapter 11 in the Eastern District of Virginia in May 2020, supported by about 71% of term lenders and 78% of IPCo noteholders. The plan included a $400m DIP and converted about $1.65bn of debt to equity. It was confirmed, and the company emerged in September 2020.
The blocker it led to
"J.Crew blocker" provisions. They come in three forms: (i) a ban on designating any subsidiary that owns material IP as unrestricted; (ii) a ban on loan parties transferring material IP to unrestricted subsidiaries; (iii) a ban on both loan parties and non-loan-party restricted subsidiaries making such transfers. Many deals also add a "trap door" restriction stopping non-loan-party restricted subsidiaries from reinvesting loan-party investment proceeds into unrestricted subsidiaries. Orrick recommends stronger fixes: extend the ban to all material assets, not just IP; require a third-party valuation above a threshold; cap the share of total assets and revenue in unrestricted subsidiaries; or remove unrestricted subsidiaries altogether. Weak points remain. Shearman notes some blockers cover only investment-basket transfers and not restricted-payment transfers. Octus found only about 10% of European high-yield bonds and loans extend the blocker to all material assets.
What to look for
- Add up day-one capacity to move value to unrestricted subsidiaries: the general investment basket, the basket for investments in non-loan-party restricted subsidiaries, and the Available Amount/builder basket. Then check whether a non-loan-party restricted subsidiary can reinvest what it receives into unrestricted subsidiaries (the trap door), which removes the per-basket caps.
- Check whether the J.Crew blocker covers all material assets, not just IP. Check that it applies to designations, exclusive licenses and transfers by non-loan-party restricted subsidiaries, and to restricted-payment and dividend routes as well as investment baskets.
- Check how investments are valued (fair market value at the time of transfer, set by the borrower or a third party), whether key terms such as 'proceeds' are defined, and whether licensing material IP back from an unrestricted subsidiary is allowed and free of covenants.
- Check the voting rules: whether Required Lenders (a simple majority) can release collateral, ratify transfers or add a no-action clause, and whether only 'all or substantially all' collateral releases are sacred rights.
Not confirmed: Timing: the SEC 10-Q dates the first 72.04% transfer to December 2016, but Torys describes it as a 2017 transaction. The task's '2016-2017' covers both steps: December 2016 for 72.04% and July 2017 for the remaining 27.96%. Valuation: J.Crew valued the 72.04% interest at about $250m. The dissenting lenders argued the IP was worth more than the basket caps allowed. Legal 500 also cites $347m of assets moved, which is really the new notes total. No independent full valuation was confirmed. Term loan size: reported as $1.5bn (press) and $1.567bn (Torys). Consent levels: the ratifying amendment drew 88% consent per the 10-Q and Retail Dive. Quimbee describes about 85% and puts the dissenters at about 12%. Final result of the Eaton Vance/Highland case after the 2019 appellate ruling, including whether the 'substantially all collateral' claim was ever decided on the merits, could not be confirmed. It appears to have been overtaken by the 2020 bankruptcy, but no source confirmed that. Exact Chapter 11 recoveries for term loans and IPCo notes, and how the IP was treated in the plan, were not confirmed. The amount of debt converted is reported as $1.65bn (company), $1.6bn (Retail Dive) and about $2bn (Bloomberg Law). Term loan trading prices before and after the transaction were not found in the sources reviewed. The exact entity chain (J.Crew Cayman, then J.Crew Brand Holdings/Intermediate, then J.Crew Domestic Brand LLC as IPCo) is described in slightly different ways across sources.
Sources: J.Crew Group 10-Q for quarter ended July 29, 2017 (SEC) · J.Crew Group 8-K July 13, 2017 (SEC) · Torys: The J.Crew trap door and its implications for leveraged finance · Legal 500: The trap door strategy - how J.Crew moved its crown jewel out of lenders' reach · Orrick: A Trap Door Intact - Fixing the J.Crew Blocker · Retail Dive: Lawsuit stymies J.Crew debt restructuring plan · Eaton Vance Mgt. v. Wilmington Sav. Fund Socy., 171 A.D.3d 626 (1st Dep't 2019) (Leagle) · Quimbee: Eaton Vance Management v. Wilmington Savings Fund Society (2018) · Shearman & Sterling: J.Crew blocker definition · Octus: The good, the bad and the ugly of J.Crew blockers · Bloomberg Law: J. Crew Files Bankruptcy, Felled by Pandemic and Heavy Debt · Just Style: J.Crew files for Chapter 11 bankruptcy protection · Retail Dive: J.Crew looks to exit bankruptcy in coming weeks
Neiman Marcus / MyTheresa spin-off to the sponsor-owned parent2017-2018 (unrestricted designation March 2017, dividend up to the parent September 2018); 2019 settlement exchange · dividend of an unrestricted subsidiary
In March 2017 Neiman Marcus designated the subsidiaries holding MyTheresa as unrestricted, and in September 2018 it dividended that equity up to a non-guarantor parent controlled by Ares and CPPIB, relying on a restricted payments carve-out for distributing unrestricted subsidiary stock, with no cash or debt reduction coming back. Term lenders and noteholders on a roughly $5 billion capital structure lost any claim on MyTheresa, and a 2019 exchange gave noteholders $1.2 billion of third-lien notes plus $250 million of MyTheresa preferred and a 50% pledge of MT Issuer equity in return for releasing their claims. Neiman still filed a prepackaged Chapter 11 in May 2020, third-lien holders recovered about 5.6%, and a July 2020 settlement put 140 million Series B MyTheresa preferred shares and $10 million of cash into a trust for unsecured creditors.
How it worked
- 2013: Ares and CPPIB buy Neiman Marcus for $6 billion, financed with a term loan dated October 25, 2013 and cash-pay and PIK-toggle indentures dated October 21, 2013.
- 2014: Neiman buys MyTheresa for $182 million in cash. MyTheresa had about $130 million of annual revenue at the time.
- Around March 10, 2017: the company designates the MyTheresa holding entities, and some associated real property, as Unrestricted Subsidiaries under both the credit agreement and the indentures. They sat under NMG International LLC. Designation took them out of the covenants and the guarantee and collateral package.
- September 2018 (disclosed in the 10-K filed September 18, 2018): the MyTheresa equity goes up the chain by successive dividends. The path was NMG International LLC to The Neiman Marcus Group LLC (a guarantor), then Neiman Marcus Group LTD LLC (the borrower/issuer), then Mariposa Intermediate Holdings LLC, then Neiman Marcus Group, Inc. That last entity is a parent that does not guarantee the debt.
- Result: MyTheresa now sat beside the borrower group, under the sponsor-controlled parent, and no longer below it. Creditors of the operating company had no structural or collateral claim on it, and no new debt or consideration flowed back.
- March 25, 2019: a transaction support agreement with creditors holding more than $2.5 billion of debt sets out a 3-year maturity extension. The participation threshold was 95% and was later cut to 91%.
- June 2019 exchange: all but $137 million of the $960 million cash-pay notes and $656 million PIK-toggle notes go into $1.2 billion of new third-lien notes due 2024 plus $250 million of 10% PIK preferred equity in MT Issuer. The third-lien notes are secured by a first lien on $200 million of unencumbered real estate (the PropCo Assets), a third lien on term loan collateral, and a pledge of 50% of MT Issuer's common equity.
- Also in June 2019: $550 million of new second-lien notes (8% cash plus 6% PIK, due April 2024) repay $550 million of term loan at par. The remaining roughly $2.2 billion of term loan is extended to October 2023 at LIBOR+6.00%. A further $250 million of junior MT preferred stays with a Neiman parent subsidiary, and all claims over the MyTheresa distribution are released.
Baskets used
- Unrestricted Subsidiary designation right in both the credit agreement and the indentures. It was conditioned on a minimum Interest Coverage Ratio test, which Marble Ridge questioned and asked to see calculations for.
- Investment capacity to support the designation. The value of a designated sub counts as an investment, and the sources do not say which basket was used.
- Restricted payments carve-out allowing distribution or dividend of the capital stock of Unrestricted Subsidiaries, except those whose main assets are cash. This was the express basis for the September 2018 upstream dividends.
- Non-guarantor parent structure: Neiman Marcus Group, Inc. sat above the obligor group and was not bound by the covenants, so equity dividended to it left the creditors' reach.
What creditors lost
Term lenders and unsecured noteholders of the roughly $5 billion capital structure lost all indirect value in MyTheresa. One newsletter describes this as roughly $280 million or more of e-commerce assets moved out for no cash. The creditor-side estimates of MyTheresa's worth ran higher, with Marble Ridge alleging a fraudulent transfer of about $1 billion of value. Creditors also said the board's own valuation of the company (over $7 billion in early 2018) was inflated by about $3.1 billion compared with an independent $3.9 billion figure, which would have made the company insolvent at the time of the transfer. The 2019 exchange gave only some of that value back. Exchanging noteholders got $250 million of MyTheresa preferred and a 50% pledge of MT Issuer equity, but had to release their claims and subordinate to new second-lien debt. In the 2020 Chapter 11, recoveries were about 33% for the extended secured term loan, under 2% for second-lien notes and 5.6% for third-lien notes. MyTheresa stayed with the sponsors apart from the 140 million Series B preferred shares put into the unsecured creditors' trust.
Outcome
No court ever ruled that the transfer was unlawful. Marble Ridge's 2018 Texas state-court fraudulent-transfer suit was dismissed in March 2019 for lack of subject-matter jurisdiction, and Neiman's defamation counterclaim was allowed to proceed. The June 2019 recapitalization exchange released claims over the distribution. S&P treated the exchange as a selective default. Neiman filed a prepackaged Chapter 11 on May 7, 2020, eliminated about $4 billion of debt, and handed ownership mainly to first-lien creditors. Judge David Jones approved the plan in early September 2020, and the company emerged by September 30, 2020. Under the July 31, 2020 MyTheresa settlement, Ares and CPPIB contributed 140 million Series B MyTheresa preferred shares, 56% of that class, plus $10 million of company cash to a trust for unsecured creditors in exchange for releases.
The blocker it led to
Lenders' main fix is to strip out the specific carve-out that lets the borrower distribute the equity of an unrestricted subsidiary. A King & Spalding guide recommends doing that, because without the carve-out any dividends on that equity stay inside the loan-party group. Lenders also pair it with J.Crew-style limits that tighten designation conditions and cap investments in unrestricted subsidiaries. Those caps use EBITDA or total-asset thresholds and bar moving material IP and other key assets into unrestricted subsidiaries.
What to look for
- The restricted payments covenant: check for any carve-out permitting dividends or distributions of the equity of Unrestricted Subsidiaries, and whether it has a dollar cap.
- Designation conditions for Unrestricted Subsidiaries: what ratio test applies (for example interest coverage), any cap as a share of EBITDA or total assets, and whether valuable assets or IP can be designated.
- Investment capacity available for the designation: general basket plus builder basket plus any unlimited 'investments in unrestricted subs' basket. Size it in dollars on day one.
- Where the parent sits: if a holding company above the borrower is not a guarantor and not bound by covenants, any upstream dividend of unrestricted-sub equity puts that value fully out of reach.
Not confirmed: Designation timing: most sources say March 2017. One newsletter says the process started in 2014 and finished in 2017, and some press accounts loosely call 2017 the year of the 'transfer'. Value of MyTheresa at the time: the estimates are not comparable. One is roughly $280 million or more of assets (newsletter), another is about $1 billion (Marble Ridge complaint as reported). The mid-2019 6-month figures were about $200.8 million of sales and $12.9 million of EBITDA. The roughly $2.2 billion IPO valuation in January 2021 comes from a newsletter only and was not confirmed against a primary source. Which investment basket or builder capacity was used to fund the 2017 designation is not stated in the sources I reached. Whether the Interest Coverage Ratio condition was actually met was disputed and never decided. The King & Spalding 'How did they do it - Neiman Marcus' PDF returned a 404 when fetched directly. Its blocker recommendation (remove the carve-out for distributing unrestricted-sub equity) is taken from a search-result summary of that guide, not a full read. Recovery figures (33% / under 2% / 5.6%) and the 8% third-lien trading price at filing come from a single Mercer Capital case study. Mercer also gives total debt as both about $5.0 billion and $5.5 billion. The exchange threshold was cut from 95% to 91% according to search-result reporting. The 8-K confirms only that the company could lower the 95% threshold. There is no single widely used name for the protection that blocks this move, unlike the 'J.Crew blocker'. Treat 'Neiman/MyTheresa protection' as an informal label.
Sources: Locke Lord (now Troutman): Neiman Marcus Capitalizes on Weak Covenant Package (via JD Supra) · Mercer Capital: Neiman Marcus, A Restructuring Case Study · Neiman Marcus Group LTD LLC Form 8-K, March 2019 (Transaction Support Agreement) · The Fashion Law: Creditors claim retailer inflated its valuation by $3.1 billion · Retail Dive: Neiman Marcus lenders reportedly mull joint lawsuit · Octus/Reorg: Marble Ridge complaint seeks avoidance of MyTheresa transfer · High Yield Harry: Saks Global Part I (Neiman/MyTheresa background) · King & Spalding: How did they do it - Neiman Marcus · ABA Business Law Today: A Tongue-in-Cheek Revisiting of Value Leakage Protection · Business of Fashion: Neiman Marcus seeks $55 million from Marble Ridge
PetSmart / Chewy.com equity transfer and guarantor release2018 · guarantor release by partial sale of a subsidiary
In June 2018 PetSmart moved 36.5% of Chewy out of the credit group, dividending 20% up to its parent through the restricted payments basket and contributing 16.5% to a newly designated unrestricted subsidiary through the investments basket. Chewy was then no longer wholly owned, which PetSmart said automatically released Chewy's guarantee and liens from the roughly $4.2B term loan and, per Cleary, the senior bonds. After a fight with the agent and lender counterclaims, about 93% of term lenders accepted a sweetened amendment in April 2019, the suit was dismissed with prejudice, and the deal gave its name to the Chewy blocker.
How it worked
- Starting point (per SFNet's summary of PetSmart's complaint): about $8B of debt, made up of a $955M ABL, a term loan of about $4.2B and three note indentures. The 2017 Chewy purchase was funded with $1.35B of first-lien notes, $650M of unsecured notes and $1B of sponsor equity.
- May 30, 2018: PetSmart formed a wholly owned subsidiary and designated it an Unrestricted Subsidiary under the ABL, the term loan and the indentures, so it sat outside the covenants and the collateral.
- June 1, 2018, step 1 (dividend): 20% of Chewy stock went to parent Argos Holdings, which distributed it to its own parent the same day. PetSmart valued the stake at $908.5M (midpoint) and counted it against the restricted payments basket.
- June 1, 2018, step 2 (investment): 16.5% of Chewy stock was contributed to the unrestricted subsidiary. PetSmart valued it at $749.5M (midpoint) and counted it against the investments basket.
- Result: Chewy became a non-wholly-owned restricted subsidiary. PetSmart said Section 9.15 of the term loan then automatically released Chewy's guarantee and its liens on Chewy assets. The 36.5% of shares now held by the parent and the unrestricted subsidiary were also outside lenders' reach.
- No new priming debt was issued. The move moved value out of the collateral, taking Chewy's guarantee and assets and more than a third of its equity away from lenders, and left that value with the sponsor and an unrestricted entity, positioned (Cleary suggests) for a later distressed exchange.
- Agent fight: lenders told Citibank not to release, PetSmart sued Citi on June 26, 2018 (No. 18-cv-5773), Citi resigned on June 19 as agent of the $4.2B TLB due 2022, and successor agent Wilmington Trust brought counterclaims (insolvency and fraudulent transfer).
- Settlement: the first amendment offer fell short of 51%. The second offered a 50 bp consent fee, a 50 bp margin increase, about $250M of debt repaid at par within 12 months, and all future asset-sale proceeds applied to consenting lenders. It drew about 93% consent on April 2, 2019, and the case was dismissed with prejudice on April 17, 2019.
Baskets used
- Restricted payments basket, Sec. 6.08(a)(viii): $200M plus the 'Available Equity Amount'. PetSmart counted the $1.0B sponsor equity contribution, giving up to $1.2B of capacity, which covered the $908.5M dividend.
- Investments basket, Sec. 6.04: $375M plus the 'Available Amount' (a $200M starter plus 50% of Consolidated Net Income). PetSmart put capacity at about $820M, which covered the $749.5M contribution to the unrestricted subsidiary.
- Unrestricted subsidiary designation: a new, empty sub was designated, then funded with Chewy shares through the investments basket.
- Automatic guarantor and lien release, Sec. 9.15 of the term loan: a guarantor is released when it stops being wholly owned through a transaction the agreement permits. Only a minority stake had to leave, not control.
- Baskets could be paid in non-cash assets (equity of a subsidiary) at the company's own valuation, and the RP and investment baskets stacked on top of each other.
What creditors lost
Term lenders (about $4.2B) and, per Cleary, the senior bondholders lost Chewy's guarantee and the liens on Chewy assets, Chewy being the fastest-growing piece of the business. 36.5% of Chewy's equity, about $1.66B at PetSmart's own midpoint values ($908.5M plus $749.5M), went to the sponsor's chain and to an unrestricted subsidiary. Lenders who consented in April 2019 recovered some value: a 50 bp consent fee, 50 bp more margin, about $250M paid down at par and asset-sale proceeds directed to them. In return they dropped the suit and gave up their challenge to the transfer. Holdouts such as CapRe were left arguing the vote was coercive. No reported loan price changes were confirmed in the sources reviewed.
Outcome
Never decided on the merits. PetSmart's suit against Citibank (Argos Holdings Inc. and PetSmart, Inc. v. Citibank, N.A., S.D.N.Y. 18-cv-5773) was settled through term loan amendments. About 93% of term lenders (about $3.9B) consented on April 2, 2019, the amendments took effect, and the parties filed a stipulation of voluntary dismissal with prejudice on April 17, 2019. CapRe then sought to take over the dropped claims, alleging the vote was coercive and the tally irregular. Chewy went public in June 2019, and PetSmart held about 69% of its shares after the offering.
The blocker it led to
The 'Chewy blocker' (also called PetSmart protection): a guarantor is not automatically released just because it stops being wholly owned. Common versions deny release when the guarantor loses wholly-owned status through a transaction with an affiliate, or one without a genuine business purpose. Some require the sub to stop being a subsidiary altogether, or to be sold for fair value to a third party. Commentary after the deal also recommended limiting dividend and investment baskets to cash, and capping how much the baskets can be stacked.
What to look for
- The guarantor release clause: does a guarantor fall away when it merely stops being 'wholly owned', or only when it stops being a subsidiary entirely or is sold to a third party for fair value? Is there a Chewy blocker covering affiliate transfers and transfers with no business purpose?
- Whether RP and investment baskets can be paid in kind (subsidiary equity or IP) rather than cash, who sets the value, and the total of RP plus investment plus unrestricted-sub capacity (here about $1.2B plus about $820M on day one).
- Builder or 'Available Equity Amount' baskets that sponsor equity can top up right before a transfer, and whether the unrestricted subsidiary definition limits what can be put into an unrestricted sub (e.g. material assets).
- Agent release mechanics: whether releases are automatic or need lender consent, and which assets count as 'sacred' and need all-lender or affected-lender consent.
Not confirmed: The task framing said 'partial share transfer and dividend'. In fact it was a 20% dividend plus a 16.5% contribution to an unrestricted subsidiary (36.5% in total), not a sale to a third party. Term loan size is given as $4.2B by some sources and $4B by others. Whether the release also reached the ABL and every indenture. Cleary says the term loan and senior bonds. SFNet says the unrestricted designation was made under the ABL, the term loan and the indentures. Whether the release was legally valid was never decided. It was settled, not adjudicated. Outcome of CapRe's challenge to the 2019 amendment: not confirmed. Loan or bond price moves around June 2018 and April 2019: not confirmed from accessible sources. The exact restrictive covenant changes in the 2019 amendment, and whether Chewy shares or the guarantee were ever restored to lenders: not confirmed. The 'consent from more than 51%' figure (Bloomberg) is the threshold needed to pass. The 93% (about $3.9B) figure (Chewy S-1/A) is the final consent level.
Sources: SFNet - Surprise! Where Did My Collateral Go (Again)? The Chewy.com Story · Cleary Gottlieb - PetSmart: Barking up the Wrong (Covenant) Tree? · Chewy, Inc. Form S-1/A (2019) - consents and dismissal · Chewy, Inc. Form 424B4 (2019) prospectus · Bloomberg - PetSmart Lenders Said to Seek Edge as Citi Quits as Agent · Bloomberg - PetSmart Makes a Second Offer to Lenders to Amend Loan · Bloomberg - CapRe Seeks to Take Over PetSmart Lawsuit That Lenders Dropped · Bloomberg - PetSmart Is Said to Move Chewy Stake in J. Crew-Style Deal · Digital Commerce 360 (Bloomberg) - PetSmart passes its loan amendment · Reorg/Octus - Covenants: PetSmart new notes (Chewy blocker commentary)
Serta Simmons Bedding 2020 uptier exchange (Fifth Circuit reversal, Dec. 31, 2024)2020 · uptier (non-pro-rata priming exchange)
In June 2020 a group holding just over half of Serta's $1.95bn first-lien term loan voted as Required Lenders to allow new super-priority debt, put in $200mm of new money, and swapped its own old loans at a discount into the new priority tranches, calling the swap an open market purchase to skip pro rata sharing. The excluded lenders were left with about $895mm of first-lien loans ranked behind at least $1.075bn of new debt, and after the January 2023 Chapter 11 their claims got about 1% of the reorganized equity. On December 31, 2024 the Fifth Circuit held a privately negotiated exchange is not an open market purchase and struck the participants' indemnity, and on July 7, 2026 the remand court awarded $261.13mm plus 9% prejudgment interest against the participating lenders.
How it worked
- Starting point: the 2016 debt was a $1.95bn first-lien term loan, $450mm of second-lien term loans and a $225mm asset-based revolver (Cleary).
- Step 1, majority amendment: the exchanging lenders held just over 50% of the 2016 loans, so they were the Required Lenders. They amended the 2016 agreement to allow new super-priority debt and to let the agent subordinate the 2016 loans to it without the other lenders' consent (Troutman/Locke Lord 2020).
- Step 2, three new super-priority tranches at the borrower: (a) First-out, $200mm of new money from the participating lenders. (b) Second-out, $875mm, issued in exchange for about $1bn of first-lien loans at 74% of face and about $300mm of second-lien loans at 39% of face (Cleary). (c) Third-out, a basket for future exchanges that was never used.
- Step 3, ranking: under a new intercreditor agreement, the new debt is repaid ahead of the remaining 2016 loans. The 2016 lenders kept their liens, but now in a junior position, so no collateral was formally released (Mayer Brown; Troutman).
- Step 4, the buyback route: Serta ran the swap through Section 9.05(g), the open market purchase exception to the Section 2.18(c) pro-rata sharing rule, rather than through the Dutch auction route (Mayer Brown; Simpson Thacher via search).
- Split of the old first-lien class (Mayer Brown): participating lenders held about $992mm (52.6%) and swapped it for about $734mm face of first-lien second-out debt. Excluded lenders held about $895mm (47.4%) and were not offered a place in the deal.
- Competing proposal: the excluded lenders had offered a rival refinancing. Serta turned it down, saying in court filings that it would have moved assets into a new subsidiary outside the lenders' reach (Bloomberg Government).
Baskets used
- Required Lenders amendment threshold (a simple majority of more than 50%): it was enough to allow new priority debt and to authorize subordination, because the sacred rights did not cover lien or payment subordination.
- Open market purchase exception (Section 9.05(g)) to pro-rata sharing (Section 2.18(c)). The term was undefined, which let the borrower buy loans back from only some lenders.
- The ratio debt, lien and intercreditor permissions were themselves changed by the majority amendment. Serta needed no existing debt basket and no unrestricted-subsidiary basket for this deal, so this was not a drop-down.
- The amendment also created a third-out exchange basket for future swaps (Troutman).
What creditors lost
Excluded lenders kept about $895mm of first-lien and about $128mm of second-lien loans, now subordinated to at least $1.075bn of new super-priority debt (Cleary). The participating lenders' swap at 74% of face moved them ahead of everyone else. The remand court used a $0.25 closing-date price for the excluded loans. It put the excluded lenders' actual position at $223.75mm against a would-have-been position of $484.88mm, a loss of about $261mm (Mayer Brown). In Chapter 11, debt fell from about $1.9bn to $315mm (Jones Day). The excluded lenders' claims got a pro-rata share of only 1% of the reorganized equity. The second-out (participating) claims got 100% of the equity, subject to dilution, plus the remaining new term loans (Restructuring Interviews).
Outcome
Timeline. March 2022: the SDNY court denied Serta's motion to dismiss, found "open market purchase" ambiguous and let an implied-covenant claim proceed. Jan. 23, 2023: Serta filed Chapter 11 in S.D. Texas. Spring 2023: Judge Jones granted summary judgment that the swap was an open market purchase, then on June 6, 2023 confirmed a plan that included an indemnity for the participating lenders. Dec. 31, 2024: the Fifth Circuit reversed on open market purchase, struck the indemnity, refused to dismiss the appeal as equitably moot, and sent the breach claims back. Nov. 2025: the bankruptcy court granted summary judgment for Serta itself on plan discharge and release grounds. March 2026: trial against the participating lenders. July 7, 2026: the court found them liable for breaching pro-rata sharing, awarded $261.13mm measured as of June 22, 2020 plus 9% New York prejudgment interest, and rejected their ratification, in pari delicto, unclean hands and mitigation defenses (Mayer Brown; Octus).
The blocker it led to
The "Serta blocker" makes subordinating existing liens or payment priority a sacred right. It then requires the consent of each affected lender, so a bare Required Lenders vote can no longer approve it (Cleary; Hughes Hubbard). Related fixes: put pro-rata sharing in the sacred rights; define or narrow the open market purchase exception; bar indirect amendment of pro-rata sharing through a separate facility; limit the majority's power to authorize priming or create future exchange baskets (Troutman). Octus found Serta blockers in 74% of US credit agreements in H1 2026, up from 67% in 2025. About 24% of 2025 agreements still did not make pro-rata sharing a sacred right. Hughes Hubbard warns that blockers often carry exceptions that weaken them.
What to look for
- Sacred rights (the 9.02(b)-style list): does it require each affected lender's consent to subordinate liens or payments? Watch for exceptions such as "new money offered to all lenders", DIP financings, or wording that covers only liens on all or substantially all collateral.
- Is pro-rata sharing (the 2.18(c)-style clause) itself a sacred right? Then check what the buyback section excepts: an undefined "open market purchase", or a term that expressly allows privately negotiated, non-pro-rata purchases.
- Required Lenders threshold and who controls it: a bare 50.1% plus control over the intercreditor terms means a majority group can prime the rest.
- Amendment powers to create new tranches or classes (incremental or other permitted debt that can rank senior) and exchange baskets: count how much priming debt could be issued on day one if a majority signs.
Not confirmed: The task calls it the "2023 Fifth Circuit decision". In fact the bankruptcy court upheld the deal in 2023, and the Fifth Circuit reversed on Dec. 31, 2024. One search summary attributed projected recoveries of 0.6% for non-participating and 75.6% for participating term lenders to the disclosure statement. I could not confirm which source said this, so it is left out. Exchange size: Cleary says $875mm of second-out debt in exchange for about $1bn of first-lien and $300mm of second-lien loans. Mayer Brown says about $734mm face in exchange for $992mm of first-lien loans. The difference probably comes from including or excluding the second-lien piece. Supreme Court cert denial on Nov. 10, 2025: seen only in a blog search summary (elevenflo), not confirmed. A Proskauer snippet suggested the July 2026 ruling went the other way on the open market exception. That conflicts with Mayer Brown and Octus, which report liability. A Law360 headline called it a $400M ruling, probably damages plus interest. Neither is used. The sponsor (reported as Advent) is not confirmed by the sources I fetched. I could not find pre- and post-deal secondary trading prices for the excluded loans. The only figure is the $0.25 closing-date price the remand court used.
Sources: Mayer Brown - Serta: Fifth Circuit uptier decision and damages ruling on remand (July 2026) · Cleary Gottlieb - The Fifth Circuit Pushes Back on Uptier Transactions in Serta · Troutman (Locke Lord QuickStudy) - Enter Sandman (2020) · Sullivan & Cromwell - Fifth Circuit Rejects Controversial Serta Transaction · Octus - Serta decision vindicates minority lenders · Jones Day - Texas bankruptcy court blesses Serta Chapter 11 plan · Restructuring Interviews - Serta's Chapter 11: Upholding the Uptier · Bloomberg Government - Serta's controversial debt deal reversed by appeals court · Hughes Hubbard - Serta: The Fifth Circuit's year-end gift to non-consenting lenders · Simpson Thacher memo (Jan. 8, 2025) · Elevenflo - Serta 2020 uptier, Fifth Circuit reversal, and damages remand
Revlon 2020 BrandCo transaction (IP drop-down with Required Lenders amendment and roll-up)2020 · drop-down to non-guarantor restricted subsidiary
In May 2020 Revlon amended its 2016 term loan so the agent released its liens on the Elizabeth Arden, American Crew and other brand IP, moved that IP into non-guarantor BrandCo subsidiaries, and pledged it for about $1.87bn of new BrandCo debt that also got guarantees from every 2016 guarantor and a pari passu lien on the remaining 2016 collateral. To beat a co-op holding about 51.5% of the 2016 loan, Revlon had friendly lenders fund a $65mn incremental revolver just before the vote, tipping it to roughly 50.1% in favour, and participating lenders rolled $846mn of 2016 loans into the BrandCo roll-up. The roughly $884mn of excluded 2016 loans lost the IP and shared the rest of their collateral, and in the 2023 plan BrandCo B-2 lenders took 82% of the equity while 2016 lenders shared 18% with B-3 lenders or a $56mn cash pool.
How it worked
- Background: in September 2016, RCPC borrowed a $1.8bn, 7-year term loan, with Citibank as agent, to fund the $1.03bn Elizabeth Arden purchase. The 2016 lenders held first-priority liens on IP and on subsidiary stock.
- Step 0 (August 2019): RCPC moved the American Crew IP to a new subsidiary that did not guarantee the 2016 loan and licensed it back. That entity pledged the IP first-lien for a $200mn Ares term loan. No 2016 lender consent was sought, and Citibank's lien on the American Crew IP was released.
- Step 1 (March 9, 2020): Revlon signed a commitment letter with Jefferies. The terms said the BrandCos would guarantee and secure the new facility first-priority, would not guarantee the 2016 loan, and that all 2016 guarantors would also guarantee the new facility.
- Step 2 (vote): the 2020 Amendment needed Required Lenders, meaning more than 50% of term loans plus revolving commitments. A co-op group holding about 51.5% committed to vote no. On April 30, 2020, RCPC had friendly lenders provide a $65mn incremental revolver under the 2016 agreement (it drew $63.5mn). Counting those revolving commitments flipped the vote to a bare majority in favour.
- Step 3 (May 7, 2020): under the amendment, Citibank released its liens on the BrandCo IP. RCPC contributed the IP (Elizabeth Arden, American Crew, other Portfolio and owned Fragrance brands) to the BrandCo entities and licensed it back for continued use.
- Step 4 (new debt): RCPC was the borrower under the 2020 BrandCo Credit Agreement, with Jefferies as agent. The BrandCos guaranteed it and gave liens on the IP in this order: 2020 BrandCo Facility ($815mn at closing, plus $65mn drawn May 28, 2020 to repay the revolver) first, Roll-up BrandCo Facility (up to $950mn of commitments) second, Junior Roll-up ($3mn) third. Total outstanding was $1,868.4mn at December 31, 2020.
- Step 5 (double-dip): all 2016 guarantors also guaranteed the BrandCo facilities, secured pari passu on the assets that still secured the 2016 loan. A pari passu intercreditor agreement between Citibank and Jefferies limited what the 2016 lenders could do to enforce.
- Step 6 (roll-up): participating 2016 lenders exchanged $846mn of 2016 loans into the Roll-up and Junior Roll-up facilities. The roll-up could be used to buy remaining 2016 loans at par for 3 years. The amendment also waived any past Defaults, including those from the 2019 deal and the revolver.
- Result: the remaining 2016 loan was $883.9mn at YE2020 ($853.3mn due 2023, $30.6mn extended to 2025). It had no claim on the brand IP and shared its remaining collateral pari passu with about $1.87bn of BrandCo debt.
Baskets used
- Required Lenders definition: majority of term loans plus revolving commitments then in effect. Adding new revolving commitments diluted the term lender majority.
- Incremental or supplemental revolving facility capacity in the 2016 agreement. It let the borrower create a new $65mn voting tranche with friendly lenders.
- Collateral release by Required Lenders vote: lien release on specific IP was treated as needing only a majority, not an all-lender sacred right. The dissenters argued that releasing all or substantially all collateral needs every lender.
- Investment and asset-transfer capacity to move IP into non-guarantor subsidiaries, and in 2019 a transfer done without any vote. Exact basket names were not confirmed.
- Permission to share 2016 collateral pari passu with new secured debt: the BrandCo debt was guaranteed by the 2016 guarantors and secured pari passu with the 2016 lenders.
- Amendment overriding pro rata sharing / buyback terms so only participating lenders' loans were bought back (the roll-up). Dissenters said this breached the protections against non-pro-rata repurchases.
What creditors lost
The non-participating 2016 term lenders, about $884mn at YE2020, lost their first lien on Revlon's main brand IP. That covered Elizabeth Arden, American Crew, other Portfolio brands and owned Fragrance brands. About $1.87bn of BrandCo debt took first, second and third liens on that IP. The same BrandCo debt also got guarantees from every 2016 guarantor and a pari passu lien on the remaining 2016 collateral, so the dissenters were diluted on the assets they kept. Participating lenders rolled $846mn of 2016 loans into the second-lien roll-up and had a 3-year right to buybacks at par. Lenders who were left out got no repurchase. Moody's treated the May 2020 refinancing as a distressed exchange, i.e. a default. In the 2023 plan, BrandCo B-2 lenders got 82% of the equity and backstopped 82% of the $670mn rights offering. The 2016 lenders split 18% with the B-3 lenders, or could take a share of a $56mn cash pool.
Outcome
On August 12, 2020, UMB Bank, acting for the dissenting lenders as successor agent, sued in SDNY. It voluntarily dismissed the case without prejudice on November 9, 2020. Separately, in August 2020, Citibank mistakenly wired about $900mn of principal to 2016 lenders. The district court let the lenders keep about $500mn, but the Second Circuit reversed on September 8, 2022 and ordered it returned. Revlon filed Chapter 11 on June 15-16, 2022 (SDNY, Case 22-10760). The dissenters (Aimco CLO 10 et al.) brought a new adversary proceeding on October 31, 2022. On February 14, 2023, Judge Jones dismissed all claims against the debtors and all equitable claims on standing grounds, finding them estate claims. The plan confirmed April 3, 2023, and effective May 2, 2023, settled the remaining claims on a global basis. It cut roughly $2.7bn of debt.
The blocker it led to
No blocker clause is named after Revlon in the sources I checked. The protections that address its parts are: (1) the J.Crew and Pluralsight blockers, which bar moving material IP to unrestricted subsidiaries (J.Crew) or to any non-loan party, including non-guarantor restricted subsidiaries (Pluralsight); (2) the Wesco/Incora protection, which bars issuing debt to sway a vote and ignores concurrent incremental loans when counting consents; (3) sacred-right consent for any amendment with the effect of releasing all or substantially all collateral; (4) the Serta blocker, which needs affected-lender consent to subordinate liens or payment priority; (5) limits on non-pro-rata buybacks.
What to look for
- The Required Lenders definition and incremental or revolver capacity. Can the borrower add a new tranche (revolver or incremental) whose holders vote, and is there a Wesco/Incora rule ignoring debt issued to sway a vote?
- Collateral release and IP transfer: is releasing specific material IP, or all or substantially all collateral (including by effect), a sacred right? Is there a Pluralsight-level blocker covering non-guarantor restricted subsidiaries, not just unrestricted subsidiaries?
- Sale-leaseback, license-back and investment capacity into non-guarantors. Revlon's 2019 move used a transfer plus license-back with no vote. Check the size of non-guarantor investment baskets and whether IP licensing back to the group is allowed.
- Pari passu and guarantee permissions: can new debt raised elsewhere also be guaranteed by existing guarantors and share existing collateral? This is the double-dip. Also check whether open-market or non-pro-rata repurchase language allows selective roll-ups.
Not confirmed: The sources disagree on the BrandCos' status. Otterbourg calls them non-guarantor restricted subsidiaries; the Mololamken article calls them unrestricted subsidiaries. The 10-K says only that they are non-guarantor indirect subsidiaries. I chose the non-guarantor restricted label but could not confirm it. None of my sources uses the phrase 'double-dip'. Calling it one is my reading of the 10-K terms: a BrandCo guarantee and IP lien, plus guarantees from all 2016 guarantors and a pari passu lien on the 2016 collateral. The March 2020 8-K/A described a facility of up to $300mn, and as summarised it called the BrandCos foreign subsidiaries. The final facilities were much larger, and I could not confirm the foreign description. Sources size the new money differently: $880mn (Reuters, Mololamken, Otterbourg) versus $815mn at closing plus $65mn on May 28, 2020 (10-K). These add up to the same $880mn. I found no reported trading price change for the 2016 term loan around May 2020, and no dollar value for the IP removed. The size of Citibank's mistaken payment is reported as about $900mn or nearly $1bn. The amount in dispute on appeal was about $500mn. Bankruptcy filing date: June 15 versus June 16, 2022, depending on the source. I could not confirm which specific investment or asset-sale baskets the 2019 American Crew transfer relied on. The plaintiffs framed it as breaching the sale-leaseback covenant (section 7.10). The plan figure of about $2.7bn of debt eliminated comes from press reports, not the Davis Polk summary.
Sources: In re Revlon / Aimco CLO 10 v. Revlon, Adv. Pro. 22-01167, Amended Decision granting Debtor Defendants' motion to dismiss (Bankr. SDNY 2023) · Revlon 10-K FY2020 debt note (XBRL R17) · Revlon 8-K/A March 10, 2020 (BrandCo commitment letter) · Otterbourg, What's a Lender to Do? 2020 Liability Management cases (slides, May 2021) · MoloLamken, Navigating Creditor-on-Creditor Violence: Lessons from Revlon & Serta (JCR, Nov 2023) · Davis Polk, Revlon chapter 11 plan confirmed · Reuters via Business of Fashion, Revlon creditors challenge 2020 loan transactions · Loeb & Loeb, Second Circuit reverses ruling on $500 million Revlon wire transfer · Moody's says Revlon's debt swap offer considered a distressed exchange (Yahoo) · FashionUnited, Revlon set to exit bankruptcy with $2.7 billion debt reduction · Octus, LME jargon buster: liability management blockers explained · Thomson Reuters, Pluralsight blockers and J.Crew blockers
TriMark USA super-priority uptier (Audax v. TMK Hawk Parent)2020 · uptier (non-pro-rata priming exchange)
In September 2020 a majority of TriMark's roughly $820mm first-lien term loan amended the credit agreement to allow senior debt, subordinate the old lien and widen the open market purchase exception, then provided $120mm of first-out new money and swapped their own loans dollar for dollar into second-out super-senior loans, a package reported at $427.5mm. Minority lenders were left third in line on the same collateral with their covenants stripped, and plaintiffs' counsel said their loans fell from about 70-80 cents to about 20-30 cents. In August 2021 the New York court let the breach-of-contract claims proceed on the theory that subordination could indirectly breach the waterfall sacred right, and in January 2022 TriMark settled by moving all remaining first-lien debt into the second-out tranche.
How it worked
- Step 0 - Starting position: TriMark had an $820mm syndicated first-lien LBO term loan from its August 2017 buyout. A lender group holding a majority of it organized with the company in spring and summer 2020 (Alston & Bird; American Banker).
- Step 1 - Majority amendment: acting as Required Lenders, the majority group voted to (a) remove the ban on incurring debt that ranks ahead of the LBO loan, (b) remove the ban on subordinating the LBO loan's lien to the new super-senior debt, and (c) broaden the no-action clause to make it harder for remaining lenders to sue (Alston & Bird). The court accepted that they were Required Lenders because no debt had changed hands before the vote (Alston & Bird).
- Step 2 - Redefine 'open market purchase': an amendment widened the defined term to cover purchases above or below par, for any consideration, with lenders chosen by the company and not offered to all (Skadden). This let the exchange avoid the pro rata sharing rule.
- Step 3 - New super-senior facility: the same borrower group signed a Super Senior Credit Agreement. It had a new-money first-out Tranche A of $120mm, funded by the participating lenders (Skadden; American Banker; TriMark press release).
- Step 4 - Uptier exchange: participating lenders sold their old first-lien loans to the company through the amended open-market-purchase route, receiving second-out Tranche B super-senior loans dollar-for-dollar. The old loans were retired (Skadden).
- Step 5 - Intercreditor: the credit agreement's definition of 'Intercreditor Agreements' was changed to include the new super-priority intercreditor. This made the security-agreement waterfall subject to it, while the waterfall wording itself appeared unchanged (Davis Polk).
- Resulting ranking on the same collateral: Tranche A new money (first-out), then Tranche B exchanged loans (second-out), then the minority lenders' old first-lien term loans. The minority loans also lost their covenants and got a slower amortization schedule (American Banker; Institutional Investor).
Baskets used
- Required Lenders (simple majority) amendment power, used to strip the debt and lien-priority limits. Lien subordination was not expressly listed as a sacred right (Alston & Bird; Davis Polk).
- Open-market-purchase exception to pro rata sharing and to the ban on assigning loans to the borrower, rewritten by majority vote to allow privately negotiated, non-pro-rata, above-market debt-for-debt exchanges (Skadden).
- Definition of 'Intercreditor Agreements', amended so a new super-priority intercreditor could sit above the existing waterfall (Davis Polk).
- No-action clause, broadened to discourage minority suits; the court refused to enforce it against the plaintiffs (Alston & Bird).
What creditors lost
The minority first-lien lenders went from senior secured to third in line on the same collateral, behind $120mm of new first-out money and the majority's exchanged second-out loans. Reported coverage puts the combined priming debt at $427.5mm. They were not offered participation, lost covenant protection and had their amortization slowed. Plaintiffs' counsel said loan prices fell from roughly 70-80 cents to 20-30 cents. Separately, American Banker reported that one old loan fell about 20 points within days of the deal surfacing, while the new loan traded near par, about 40 points above the debt it primed. In the January 2022 settlement the holdouts were moved up into Tranche B alongside the majority, but they stayed behind Tranche A.
Outcome
Minority lenders sued in NY Supreme Court in November 2020 (Index No. 565123/2020). On August 16, 2021 the court partly denied the motion to dismiss. Breach-of-contract claims went forward on the theory that subordinating the old loans could breach the waterfall sacred right, and the amended no-action clause was held unenforceable against the plaintiffs. The court dismissed the fraudulent-transfer, implied-covenant and sponsor tortious-interference claims, along with the theory that the majority were not Required Lenders. On January 7, 2022 TriMark announced a settlement: all first-lien term debt was swapped dollar-for-dollar into Tranche B, Tranche A stayed senior, and the litigation was to be dismissed once the exchange closed, expected by January 31, 2022. There was no final merits ruling. In 2022 the Delaware bankruptcy court in TPC Group reached the opposite view on similar sacred-right wording.
The blocker it led to
Serta/TriMark protection, often called an anti-Serta provision: lien subordination and payment subordination of the existing loans are made sacred rights that need each affected lender's consent. It is often paired with a requirement that any non-pro-rata open-market purchase or exchange be offered to all lenders pro rata. Skadden reported that lenders began demanding anti-Serta language after these 2020 deals, though its use was already declining in 2021.
What to look for
- The amendments section: are subordinating the loans' liens and payment priority listed as sacred rights that need every affected lender's consent, or can a simple majority do it?
- The pro rata sharing and assignment-to-borrower sections: is 'open market purchase' or 'Dutch auction' undefined or loosely defined, and can Required Lenders amend it? Does it require cash, retirement of the loans, or an offer to all lenders?
- The Required Lenders threshold (simple majority versus supermajority) and how concentrated the holder base is: can a small group of funds reach 50.1%?
- Permitted debt and lien carve-outs and the 'Intercreditor Agreements' definition: can a new senior intercreditor be added by majority vote, and does the no-action clause try to stop individual lenders from enforcing their own consent rights?
Not confirmed: Split of the $427.5mm package: the $120mm new-money Tranche A is confirmed by several sources. The exchanged Tranche B is reported as $307.5mm in complaint-based summaries and about $307mm by Reorg; I could not confirm the exact figure from a primary source I fetched. Price impact: plaintiffs' counsel said 70-80 cents fell to 20-30 cents (Institutional Investor). American Banker described a 20-point drop and a roughly 40-point gap to the new loan. These are advocacy and press figures, not confirmed trading data. The exact share of the first-lien loan held by the participating group was not stated in any source I read. Sponsor identity: American Banker says TriMark is owned by Centerbridge, and search summaries name Centerbridge and Blackstone as sponsors. Alston & Bird only says two unnamed PE firms. Blackstone/GSO was reported as a participating lender. A search summary said the transaction stripped restrictions on senior incremental debt specifically; Alston & Bird describes it more generally as a restriction on debt senior to the LBO loan. The task framed this as a 2020 uptier, and that matches what happened: the deal closed in September 2020 and the suit was filed in November 2020.
Sources: Alston & Bird - TriMark: Are Sacred Rights Still Sacrosanct? (Sept 2021) · Skadden - Unhappy Lenders Challenge Aggressive Debt Exchanges (2022 Insights) · Davis Polk - Bankruptcy Court holds sacred right in an indenture is not an anti-lien subordination clause (TPC vs TriMark) · TriMark USA Announces Resolution Of Litigation With Its Lenders (Jan 7, 2022 press release via MarketScreener) · Institutional Investor - Creditor-on-Creditor Violence Lands Big Managers in Court · Opalesque - TriMark lenders go to court over priming fight (Nov 10, 2020) · American Banker / Asset Securitization Report - Oaktree deal crushed a leveraged loan
Boardriders super-priority uptier (ICG Global Loan Fund 1 DAC v. Boardriders, Inc.)2020 · uptier (non-pro-rata priming exchange)
In August 2020 Boardriders and its sponsor Oaktree had a hand-picked majority of its $450 million first lien term loan put in $110 million of new money and swap $321 million of their loans at par into a new super-priority facility, while the loans traded at roughly 50-60 cents. The majority also stripped the old agreement's covenants and treated the swap as an open market purchase outside pro rata sharing, leaving excluded lenders behind about $431 million of new debt. On October 17, 2022 the New York court let the excluded lenders' contract and good-faith claims proceed, and the case later settled on undisclosed terms.
How it worked
- Starting point: an April 6, 2018 syndicated credit agreement with a $450 million first lien term loan, which financed Oaktree's buyout (Billabong combination). Pro rata sharing of repayments was a sacred right needing consent from each affected lender.
- Summer 2020: Oaktree-affiliated lenders held private talks with a hand-picked group of existing lenders about liquidity financing. Together that group held enough loans to be Required Lenders (a majority).
- New money: the participating lenders and sponsor affiliates provided up to $110 million of new super-priority loans to Boardriders.
- Roll-up: the borrower swapped $321 million of the participants' existing first lien loans at par into the new super-priority facility. It called this a non-pro-rata 'open market purchase', so pro rata sharing did not apply. The loans were reportedly trading at about 50-60% of par.
- Ranking: the new facility, about $431 million (rolled-up plus new money), sits ahead of the remaining 2018 first lien loans held by the excluded lenders. One source describes the rolled-up loans as a second-out tranche behind the new money inside the super-priority facility.
- Covenant strip: at almost the same time, the Required Lenders amended the 2018 agreement to remove all or nearly all affirmative and negative covenants. Those protections moved into the new super-priority agreement.
- Agent swap: the original first lien agent resigned before closing, and a successor agent signed off on the amendments.
- No-action clause: the plaintiffs say the no-action provision was amended to block suits by the minority. The court found they had adequately alleged this was done in bad faith.
Baskets used
- Open market purchase exception to the pro rata sharing clause. The term was undefined, and the borrower used it to repurchase only the participants' loans by exchanging them at par.
- Required Lenders (simple majority) amendment power. It was used to strip covenants, amend the no-action clause and let the new super-priority debt and liens in.
- No express sacred right protecting lien or payment subordination. Subordination was not on the all-lender consent list, so majority consent was treated as enough.
- Roll-up of existing debt as non-cash consideration for the 'purchase'.
- Agent resignation and replacement, so a willing successor agent could sign the amendments.
What creditors lost
Excluded first lien lenders were pushed behind about $431 million of new super-priority debt: $321 million rolled up at par plus $110 million of new money. The original facility was $450 million, so that leaves roughly $129 million at the old first lien level (derived figure). They also lost the 2018 agreement's affirmative and negative covenants and, they allege, their pro rata treatment. Participants swapped loans worth about 50-60 cents into senior paper at 100 cents. Non-participants got no chance to join.
Outcome
Excluded first lien lenders (ICG Global Loan Fund 1 DAC and others) sued on October 9, 2020 in New York Supreme Court, case no. 655175/2020. On October 17, 2022, Justice Andrea Masley mostly denied the motions to dismiss. Three findings stood out. First, 'open market purchase' was undefined and ambiguous, so whether the exception applied was a question of fact. Second, the pro rata and sacred-rights provisions could be breached indirectly even with no express ban on subordination. Third, the implied covenant claim and the bad-faith attack on the amended no-action clause could go forward. The court dismissed the tortious interference claim against Oaktree because of its economic interest defense. The plaintiffs' counsel (Herrick) says the main claims went to discovery and the parties later settled on terms favorable to the minority, without disclosing them. Separately, Authentic Brands Group bought Boardriders in 2023 for a reported price above $1.25 billion.
The blocker it led to
The usual fix is a Serta/Boardriders blocker. It makes subordination of the loans' liens or payment rank a sacred right, needing consent from every lender, or every affected lender, for any subordination or intercreditor agreement. It also narrows the open market purchase exception: purchases must be at market prices, done without collusion, limited when the buyer is the sponsor or an affiliate, and paid in cash only, which rules out roll-ups. It also bans indirect amendments to the pro rata sharing clauses. In Serta, the Fifth Circuit later read an undefined 'open market purchase' narrowly, as a purchase in the actual secondary market for syndicated loans.
What to look for
- Is subordination of liens or payment on the sacred-rights list (all-lender or each-affected-lender consent)? Or can Required Lenders approve new pari or senior debt and intercreditor agreements?
- How is 'open market purchase' defined and limited? Look for market pricing, cash-only consideration, no debt-for-debt exchanges, limits on sponsor or affiliate purchases, and a Dutch auction open to all lenders as the only non-pro-rata route.
- Can Required Lenders strip covenants and amend the no-action clause, agent provisions and waterfall in the same step as an exchange? Is there a ban on indirect amendments to pro rata sharing?
- What is the Required Lenders threshold, and how concentrated are the holdings? A sponsor-friendly club with just over 50% can carry out the whole uptier.
Not confirmed: Pricing: one source says the loans traded at 50-60% of par, and a search summary of another described a 40-50% discount. These are consistent, but no exact trading price was confirmed. Structure of the super-priority facility: Proskauer describes the rolled-up loans as a junior second-out tranche behind the new money. Locke Lord just calls the whole $431 million super-priority. The exact first-out/second-out split was not confirmed. Settlement terms, date, and whether the excluded lenders were paid out (for example at the 2023 Authentic Brands sale) were not disclosed in the sources found. Only Herrick's statement that the case settled favorably is confirmed. The exact Required Lenders percentage was not stated. Sources say only a majority of the loans. Oaktree as sponsor and Justice Andrea Masley as the judge come from search-result summaries of the Winston and Cleary memos, which could not be fetched directly. Proskauer independently confirms Justice Masley. One search summary mentioned a different judge (Joel Cohen), which appears to be wrong. The roughly $129 million of debt left at the old first lien level is my own arithmetic ($450M minus $321M). It ignores amortization and is not a reported figure.
Sources: Locke Lord QuickStudy (Troutman): Not Cool Dude - Surf and Skate Company Primes Lenders with Uptiering Transaction (Oct 28, 2020) · Proskauer: Boardriders - Minority Lenders Win Round One · Goodwin: Breach of Contract and Implied Covenant (ICG Global Loan Fund 1 DAC v. Boardriders, Oct 17, 2022) · Herrick: ICG Global Loan Fund 1 DAC, et al. v. Boardriders, Inc., et al. (matter page) · Winston & Strawn: Boardriders in Important Uptiering Case - Minority Lender Claims Survive Another Day · Cleary Gottlieb: NY Supreme Court Allows Claims by Minority Lenders Not Participating in Uptier Debt Exchange to Survive Motion to Dismiss · O'Melveny: Priming Transactions Update - New Serta Developments · FashionUnited: Authentic Brands Group closes Boardriders acquisition
Travelport IP transfer to an unrestricted subsidiary (2020)2020 (not confirmed by a fetched source) · drop-down to unrestricted subsidiary
This research is incomplete. The workflow's shared web-search budget ran out on the first query, so no source on the 2020 transaction itself could be found or fetched. The only fact confirmed from a source is background: Travelport was taken private on May 30, 2019 by affiliates of Siris Capital Group and Evergreen Coast Capital, for $4.4 billion.
How it worked
- Not confirmed from any source. The workflow's search limit was used up before any source on the 2020 deal could be found.
- Confirmed background only: Siris Capital Group and Evergreen Coast Capital affiliates bought Travelport on May 30, 2019 for $4.4 billion, so it was a sponsor-owned leveraged buyout borrower by 2020.
Baskets used
- Not confirmed. Analysts generally link this type of move to investment capacity in unrestricted subsidiaries, but no source on Travelport's own credit agreement was found.
What creditors lost
Not confirmed. No source was found giving the collateral removed, the loan price change, or which lenders were left out.
Outcome
Not confirmed. No fetched source covered any lawsuit, settlement, or later financing.
The blocker it led to
Not confirmed for Travelport in particular. The usual fix for drop-downs of valuable IP to an unrestricted subsidiary is a J.Crew-style blocker: it bars moving material intellectual property out of the restricted group, or designating as unrestricted a subsidiary that holds it. No source here ties a specific blocker to Travelport.
What to look for
- Whether the agreement has a J.Crew-style blocker covering material IP, both outright transfers and exclusive licenses to unrestricted subsidiaries.
- How much the borrower can invest in unrestricted subsidiaries in total, adding up the general basket, the builder basket and any non-guarantor restricted subsidiary basket that can pass value onward.
- Whether consent of every affected lender is needed to release collateral or subordinate liens, or only Required Lenders.
- Whether the asset-sale and collateral-release rules let a transfer to an unrestricted subsidiary release the lenders' lien on the IP automatically.
Not confirmed: The whole transaction story is unverified. The workflow's 200-call search budget was used up on this agent's first query, so no court filing, press release, law-firm memo or press article about the deal could be found. The user can send a follow-up message, or raise CLAUDE_CODE_MAX_WEB_SEARCHES_PER_SESSION, to finish this research. Unverified recollection, not sourced: in 2020 Travelport is said to have moved part of its IP into an unrestricted subsidiary and raised new money against it. Lenders are said to have objected or sued, and a settlement is said to have followed around mid-2020 with new super-priority financing, possibly about $500 million, partly from the sponsors. None of this, including dates, amounts, who sued and how it was settled, could be confirmed. It is kept out of the summary. Whether Travelport's case was a full asset drop-down, a partial transfer or an exclusive license of the IP is unconfirmed. Travelport's press-release archive at travelport.com/press-releases goes back only to October 12, 2020, so the company's own 2020 announcement could not be checked. Travelport has been private since 2019, so there are no SEC filings to check.
Sources: Travelport - Wikipedia (2019 acquisition by Siris and Evergreen Coast, $4.4bn) · Travelport press releases archive, page 15 (earliest listed release is October 12, 2020)
Mitel Networks non-pro-rata uptier exchange2022 · uptier (non-pro-rata priming exchange)
In October 2022 a majority group of Mitel's first and second lien lenders put in about $156 million of superpriority first-out money and swapped their old loans into second-out (5% discount) and third-out (18% discount) superpriority tranches, leaving the excluded lenders behind all three. On December 31, 2024 the First Department dismissed the excluded lenders' case, holding that the agreement let the borrower purchase loans by assignment with no open market or cash requirement and that subordination was only an indirect effect that triggered no sacred right. Mitel filed a prepackaged Chapter 11 in March 2025, confirmed in 39 days, which cut about $1.15 billion of debt and gave priority lien claims 66.7% of the new equity.
How it worked
- 1. A group of lenders holding a majority of both the first lien and the second lien term loans negotiated the deal with Mitel and its sponsor, Searchlight. Mitel was not a broadly syndicated facility, so a majority group was easier to put together.
- 2. The majority group used its Required Lender vote to amend the credit documents so that new priming debt was allowed and the existing liens ranked behind it. The existing loans' collateral was left in place but pushed down in priority.
- 3. New money: the participating lenders lent about $156 million of new superpriority first-out term loans, ranked first.
- 4. Exchange 1: the participating first lien lenders swapped their old first lien loans for superpriority second-out loans at a 5% discount to par, ranked second.
- 5. Exchange 2: the participating second lien lenders swapped their old second lien loans for superpriority third-out loans at an 18% discount to par, ranked third.
- 6. The exchanges were set up as the borrower 'purchasing' loans by assignment, which is an exception to the pro rata sharing clause. The purchase price was paid in new superpriority debt, not cash.
- 7. Excluded lenders kept their old first and second lien loans, which now ranked behind all of the new superpriority debt. In the March 2025 bankruptcy schedule these appear as Legacy Senior Term Loans ($235M) and Legacy Junior Term Loans ($108M).
Baskets used
- Borrower buyback by assignment: an exception to pro rata sharing that let the borrower purchase loans from lenders at any time. It had no 'open market' qualifier and no requirement to pay in cash. This was the key provision.
- Required Lenders (majority) amendment power: used to permit the new priming debt and to subordinate the existing liens. Subordinating liens was not a sacred right needing every lender's consent.
- Sacred rights limited to amendments that 'directly adversely affected' a lender: the court read the excluded lenders' subordination as only an indirect effect, so no consent from each affected lender was needed.
What creditors lost
Excluded first lien and second lien lenders went from top-ranked secured debt to behind three new superpriority tranches: $156M of new money first-out loans, then the exchanged first lien debt (second-out), then the exchanged second lien debt (third-out). Participating lenders took a 5% (first lien) and 18% (second lien) haircut to par in exchange for moving to the front of the line. At the March 2025 bankruptcy filing, secured funded debt was about $1.31B. The non-participating legacy loans totaled about $343M ($235M senior plus $108M junior), and both legacy tranches ranked behind the Senior Loans. In the plan, priority lien claims got 66.7% of the new equity plus the roll-up of $62M of Priority Lien loans into the DIP, and all other term loan deficiency claims shared 33.3%. Simple takeaway: a majority group plus an uncapped buyback-by-assignment clause let insiders subordinate everyone else on day one, without collateral moving to a new entity.
Outcome
Trial court (NY Supreme Court) dismissed the implied covenant, tortious interference and fraudulent transfer claims but kept the breach of contract claims. On December 31, 2024, the Appellate Division, First Department, unanimously reversed and dismissed all claims (Ocean Trails CLO VII v. MLN Topco Ltd., No. 2024-00169). It upheld the non-pro-rata exchange as a permitted 'purchase' and found no sacred-right violation. The opposite result came the same day in the Fifth Circuit's Serta ruling, because Serta's buyback clause was limited to 'open market' purchases. Mitel filed a prepackaged Chapter 11 in the Southern District of Texas around March 9-10, 2025 (Case No. 25-90090), with about $124.5M of new financing from a majority of lenders. The plan was confirmed April 17, 2025. It cut debt by about $1.15B and annual cash interest by about $135M, cancelled Searchlight's equity, and resolved the remaining uptier litigation.
The blocker it led to
Mitel-type protection (an extension of Serta protection): limit borrower buybacks to true open-market purchases or pro rata offers open to all lenders. Define 'open market purchase' narrowly, as the Fifth Circuit did in Serta. Put the buyback, assignment and open-market-purchase provisions on the sacred rights list. Broaden sacred rights from 'directly' adversely affected to amendments that have the 'effect of' subordinating liens or payment, or of releasing collateral. Add umbrella liability management provisions that ban uptiers used to subordinate existing debt. Lenders also negotiate cooperation agreements among themselves.
What to look for
- Buyback and assignment clause: can the borrower buy loans from 'any lender' by assignment, with no 'open market' or pro rata offer requirement? Does it allow non-cash consideration, such as new debt? If yes, a Mitel-style exchange is open.
- Sacred rights wording: is the consent of each affected lender required only for amendments that 'directly' affect it, or also for changes that subordinate liens or payment? Is subordination (lien and payment) itself a sacred right? If not, a majority can prime.
- Required Lenders threshold and holder concentration: a simple majority, held by a few large holders, makes it easy to form a group that captures the deal.
- Presence of a liability management blocker, Serta/Mitel language, or a cooperation agreement. Their absence means day-one uptier capacity is limited only by how much new superpriority debt the majority group will fund.
Not confirmed: Total new debt put ahead of the excluded lenders: a search-result summary attributed to CreditSights said $857mn ahead of the original first liens and another $254mn ahead of the second liens. I could not open the source (https://know.creditsights.com/?p=24294 redirects), so I left these numbers out of the summary. Tranche labels at filing differ by source. Elevenflo lists 'Second Lien Term Loans' of $576M and 'Third Lien Term Loans' of $157M, which likely match the exchanged second-out and third-out loans, but I could not confirm that mapping. Whether the trial court found the 'purchase' term ambiguous: Paul Weiss says so; another search summary attributed the ambiguity finding only to Serta. The trial judge's name and the decision date were not confirmed. I could not open the appellate opinion PDF directly (403). Holdings come from the law firm memos, which agree with one another. Exact credit agreement section numbers and the Required Lenders threshold were not reported in the sources I could reach. The deal name given was accurate: this was a 2022 non-pro-rata uptier exchange, not a drop-down. It is separate from the 2025 Chapter 11.
Sources: Paul, Weiss - Appellate Review of Uptier Transactions: Serta and Mitel Decisions Reversed on Appeal · NY Appellate Division, First Dept - Ocean Trails CLO VII v. MLN Topco (2024-00169) · Greenberg Traurig - Serta, Mitel and Incora's Potential Impact on Uptiers · Mayer Brown - Serta and Mitel: The Latest Major Court Decisions on Uptier Transactions · Bloomberg Law - Mitel Files for Bankruptcy, Gets $124.5m in Financing · Elevenflo - Mitel Networks: $1.15B Prepackaged Plan Confirmed in 39 Days
Envision Healthcare / AmSurg unrestricted-subsidiary drop-down2022 · drop-down to unrestricted subsidiary
On April 29, 2022, without a lender vote, Envision designated about 83% of its AmSurg ambulatory surgery business as unrestricted, releasing it from the guarantees and liens of the roughly $5.7bn term loan, and AmSurg then raised new first-lien debt and about $1.3bn of second-lien debt swapped for Envision loans bought back near 66 cents, sending the cash up through an intercompany loan. About $2.6bn of debt then sat ahead of roughly $3.9bn of left-out term loans, which reportedly fell to about 50 and then 40 cents, and an August 2022 uptier pushed non-participants to fourth-out. Both silos filed Chapter 11 in May 2023, AmSurg first-lien lenders were repaid in cash and its second-lien holders took 100% of AmSurg equity while Envision's left-out debt got at most warrants, and the deal gave its name to the Envision blocker.
How it worked
- Step 1, new money at AmSurg: AmSurg LLC signed a new first-lien credit agreement (about $1.3bn of commitments; Octus describes $1.1bn of first-lien debt plus a $200m delayed-draw term loan). The lenders were third parties Angelo Gordon and Centerbridge, joined by existing Envision lenders Pimco, HPS, Sculptor and King Street.
- Step 2, unrestricted designation: Envision's board designated AmSurg Holdco and its subsidiaries (83% of the ambulatory business; 17% stayed restricted) as Unrestricted Subsidiaries under the 2018 debt documents. Their guarantees and liens fell away, and the existing agent, Credit Suisse, released the liens on the AmSurg assets.
- Path used (S&P): assets moved first to a non-guarantor restricted subsidiary and then on to the unrestricted subsidiary, the so-called trapdoor.
- Step 3, cash back up to Envision: the remaining Envision group could not guarantee debt of an unrestricted subsidiary, so AmSurg lent the proceeds to Envision under an intercompany credit agreement with a rolling one-year maturity. S&P called this kind of loan unusual, if not unique. Under the Envision plan, intercompany claims of about $1.83bn including interest were cancelled.
- Step 4, discounted exchange and buyback: AmSurg issued about $1.3bn of second-lien debt that was exchanged for Envision term loans at a blended price of about 66 cents. Reported totals are about $1.8-1.9bn of Envision debt retired, about $580m of discount captured, and about $90m of interest saved.
- Ranking result: the AmSurg first- and second-lien lenders held direct claims on AmSurg's assets, which ranked structurally ahead of the Envision term loans that no longer had those assets as collateral.
- Follow-on (June to August 2022): an Envision-level uptier split the remaining debt into first-out to fourth-out tranches, with non-participating lenders pushed to fourth-out.
Baskets used
- Unrestricted-subsidiary designation right in the 2018 credit agreement, used for AmSurg Holdco and its subsidiaries (83% of the business)
- A broad reading of the 'specified disposition' definition: the argument was that designating a subsidiary unrestricted is not a transfer while Envision still owns 100% of it (reported by Max Frumes; Covenant Review disagreed)
- Two-step trapdoor through a non-guarantor restricted subsidiary into the unrestricted subsidiary (per S&P)
- The intercompany loan back to Envision reportedly relied on the incremental accordion and voluntary prepayment provisions, not the intercompany debt basket (per Frumes)
- Agent lien-release mechanics: Credit Suisse released the AmSurg liens on designation
What creditors lost
Collateral removed: about 83% of AmSurg, which the company valued at roughly $3bn, left the existing term loan's collateral and guarantee package (reported elsewhere as about $2.5bn of collateral). About $2.6bn of new debt was placed ahead of roughly $3.9bn of left-out term loans, and those loans reportedly traded down to about 50 cents and then about 40. In the later Envision uptier, non-participants were pushed to fourth-out. Before the filing, the fourth-out (the former first lien) was expected to recover about zero, and the third-out close to zero. Under the plan, Envision unsecured funded debt, including the third-out and fourth-out, got warrants only if its class accepted the plan. The insiders who joined the AmSurg deal came out well. AmSurg first-lien lenders were repaid in full in cash, including a roughly $230m prepayment premium. AmSurg second-lien holders took 100% of AmSurg's equity, and on the reported roughly $3.9bn Ascension sale in 2025, Octus estimates more than 1.3x on their investment.
Outcome
Envision and AmSurg filed Chapter 11 on May 15, 2023 (S.D. Tex., Judge Christopher Lopez, Case No. 23-90342). The plans were confirmed October 11, 2023 and took effect November 3, 2023. The restructuring cut about 70% of Envision's prepetition funded debt; Reorg cited about $7.4bn of deleveraging across both silos. AmSurg: revolver and first-lien claims were paid in cash from a roughly $1.6bn exit term loan, and second-lien holders received 100% of the reorganized equity, subject to a $300m rights offering. Envision: first-out lenders received the equity. Litigation: Crescent Capital and Vibrant sued in July 2023, claiming the drop-down and uptier broke the credit agreement's sacred-rights clause, and dismissed the suit with prejudice in November 2023. The unsecured creditors' committee sought standing to bring fraudulent-transfer claims and settled in August 2023 for $35m in cash and 1.5% of reorganized Envision equity for unsecured noteholders, plus $5m for general unsecured creditors. An independent director's investigation found about $1.7bn of quantified benefit from the transactions and no evidence of actual fraud. No court ruled on whether the deal was allowed under the documents.
The blocker it led to
The "Envision blocker" (2022): transfers to, and designations of, unrestricted subsidiaries are allowed only under one dedicated unrestricted-subsidiary investment basket. That basket cannot be reclassified, reallocated, or rebuilt from investment returns, and arm's-length deals are sometimes carved out. It builds on the J.Crew blocker, which bans moving material IP (or material assets) to unrestricted subsidiaries. Borrowers often weaken it by adding the general or builder basket to the permitted list, or by limiting it to designations only. Unless the blocker is a sacred right, a majority lender group can waive it.
What to look for
- Unrestricted-subsidiary capacity: add up every basket that can fund an investment in or designation of an unrestricted subsidiary (dedicated unsub basket, general investments, builder/available amount, unlimited investments in non-guarantor restricted subsidiaries that open the trapdoor), and check whether an Envision blocker limits this to one non-reallocatable basket.
- Definitions of 'Disposition'/'Asset Sale'/'Specified Disposition' and the designation mechanics: does designating a subsidiary unrestricted count as a transfer of its assets, is there a cap on the EBITDA or assets that can be designated (e.g. an x% of Consolidated EBITDA test), and are material assets (not just IP) protected?
- Whether the borrower may guarantee or borrow from an unrestricted subsidiary, and which baskets (intercompany debt, incremental, ratio debt) let an unsub lend money back up to the borrower.
- Release-of-guarantee and lien-release provisions, plus whether these protections and the pro-rata and subordination terms are sacred rights or can be changed by Required Lenders (simple majority).
Not confirmed: Precise name: this was an unrestricted-subsidiary designation (with a trapdoor through a non-guarantor restricted subsidiary), not a classic asset drop-down. A separate August 2022 Envision uptier followed. Which investment basket(s) funded the designation and how much capacity each held is not stated in any source I could open. The 'specified disposition' and accordion/prepayment basket points rest on one commentary piece (Frumes/LinkedIn), and Covenant Review disputed the reading. Timing and size of the second-lien exchange: Frumes ties a $1.826bn exchange at 66 cents into $1.3bn of second lien to the April deal. Elevenflo puts $1.3bn of second lien in a June to August phase that repurchased $1.903bn. S&P summaries cite about $1.5bn of term loan B bought at a blended 66. The amount of collateral moved is reported as about $2.5bn (Becker's/Bloomberg) and as a roughly $3bn company valuation of AmSurg (Frumes). Becker's says about 80% of AmSurg; S&P and Reorg say 83%. The intercompany loan amount varies: about $1.8bn including interest ($984m short-term plus $849m long-term) versus $1.833bn of claims cancelled. The final recovery for Envision fourth-out/non-participating lenders under the confirmed plan was not confirmed; only the plan structure (warrants if the class accepts) and pre-filing estimates of about zero (Creditflux/BofA) were found. The Octus figure of more than 1.3x returns for AmSurg second-lien lenders is an Octus estimate based on a reported, not confirmed, Ascension valuation.
Sources: Elevenflo: Envision Healthcare dual-silo Chapter 11 · Max Frumes: Envision rewrites book on liability management exercises · Octus Court Opinion Review July 2025: AmSurg drop-down lenders cash out · S&P Credit FAQ: Envision Healthcare's two major restructurings in 100 days · Becker's ASC: AmSurg at the center of $2.5B Envision lender dispute · Reorg: Envision/AmSurg Chapter 11 · Reorg: AmSurg lenders working with restructuring advisors · Bloomberg Law: KKR's Envision Healthcare plots complex restructuring plan · Creditflux: CLOs hit by bankruptcy of Envision as zero recovery predicted · Healthcare Finance News: Envision achieves financial restructuring, slashes 70% debt · Cleary Gottlieb: Defense Against the Dark Arts, a guide to LME blockers · Thomson Reuters: Pluralsight blockers and J.Crew blockers
Incora (Wesco Aircraft Holdings) non-pro-rata uptier2022 (transaction); 2023 Chapter 11; July 2024 oral ruling and January 2025 written ruling by the bankruptcy court; December 2025 district court reversal; Fifth Circuit appeal argued November 2026 · uptier (non-pro-rata priming exchange)
In March 2022 Wesco used a simple-majority vote to issue $250mm of additional 2026 secured notes only to its majority holder group, lifting that group above the two-thirds needed to release liens, and the group then released the liens on the 2024 and 2026 notes and exchanged its own notes into new super-priority 1L and 1.25L notes. The bankruptcy court held in 2024 and 2025 that the linked steps breached the 2026 indenture and reinstated the liens, but on December 8, 2025 the district court reversed, testing each step on its own and limiting the minority to an unsecured damages claim. The plan gives about 76% of reorganized equity plus $420mm of take-back notes to the majority and 24% to the minority, subject to the Fifth Circuit appeal argued on November 2, 2026.
How it worked
- Starting point: $650mm 8.5% senior secured notes due 2024, $900mm 9% senior secured notes due 2026 and $525mm 13.125% unsecured notes due 2027.
- Holder position: the majority group held two-thirds or more of the 2024 notes but about 59% of the 2026 notes. In February 2022 a minority group announced it held more than one-third of the 2026 notes, which is enough to block a lien release that needs two-thirds.
- Step 1 (Third Supplemental Indentures): with simple-majority consent, the indentures were amended to allow $250mm of additional 2026 notes ranking pari passu with the existing ones.
- Step 2: only the participating holders bought the $250mm of new 2026 notes, for new money. That raised the group's share of the 2026 notes above two-thirds.
- Step 3 (Fourth Supplemental Indentures): with the now two-thirds-plus vote, the liens securing the 2024 and 2026 notes were released and protective covenants were stripped.
- Step 4: participating holders exchanged their old notes into new super-priority 1L and 1.25L secured notes. Holders who did not participate kept old notes that were now unsecured and ranked behind the new priming debt.
- Other documents (credit agreements and other debt) were also amended to permit the new secured notes.
Baskets used
- The majority-vote right to issue additional notes under the existing indenture. This let the company create new votes and dilute the blocking minority.
- The two-thirds threshold for lien release in the indentures, met once the new notes were issued.
- Amendment provisions that tested each step on its own. The 2026 indenture had a sacred right covering amendments with the effect of releasing all or substantially all collateral, but the district court held each step complied when it was executed.
- No express sacred right against subordination or non-pro-rata exchanges. The district court refused to imply one.
What creditors lost
Non-participating 2024 and 2026 secured noteholders lost their liens. They ended up unsecured and behind the new super-priority 1L and 1.25L notes, and they were shut out of the $250mm new-money notes and the exchange. Under the district court ruling their remedy is an unsecured damages claim, which Cleary notes could be partly or wholly out of the money. In the plan, the minority 2026 holders get 24% of reorganized equity, against 76% plus $420mm of convertible take-back notes for the majority group, subject to adjustment depending on the appeal. The sources reviewed give no per-holder dollar loss or bond price move.
Outcome
Chapter 11 filed June 2023 in the Southern District of Texas, which stayed the earlier New York lawsuit. After a 35-day trial, Judge Isgur ruled orally in July 2024 and in writing in January 2025: no breach of the 2024 indenture, but a breach of the 2026 indenture. His remedy reinstated the 2026 liens, and the majority's $250mm would have become an unsecured claim. The plan was confirmed on the understanding it could be revised if that ruling were reversed, and the company emerged in January 2025. On December 8, 2025, Chief Judge Crane in the district court reversed: each step complied, no domino effect, no implied sacred rights, and damages are the proper remedy. The minority appealed on January 6, 2026, and the Fifth Circuit heard argument on November 2, 2026. No ruling has been confirmed.
The blocker it led to
The sources point to a few drafting fixes rather than one named blocker. First, sacred rights should be broad and state outright that an amendment which has the effect of releasing collateral or subordinating the debt needs each affected holder's consent, or a supermajority. Second, the documents should bar uptiers that subordinate existing debt by contract or by structure, through broader LME blockers or umbrella provisions. Third, holders can sign co-operation agreements so the group cannot be split. The structural lesson from Incora itself is to stop a simple majority from issuing additional pari notes that create votes, and to test a lien-release vote on the combined effect of linked steps. The sources reviewed do not name a specific market blocker for this.
What to look for
- Whether a simple majority can authorize additional pari passu notes or loans, and whether notes issued to insiders or majority holders count toward later votes.
- The vote needed to release all or substantially all collateral or guarantees, and whether it covers amendments that have the effect of a release, including linked multi-step transactions.
- Whether lien subordination, payment subordination and non-pro-rata exchanges are on the sacred-rights list with each-affected-holder consent.
- Pro rata sharing language for affiliate or sponsor repurchases, and how open-market or exchange purchases are defined.
Not confirmed: The task framed this as a 2024 Texas bankruptcy ruling. That July 2024 ruling was only an oral bench ruling. The written opinion came in January 2025, and the district court reversed it in December 2025. The 2024 Fifth Circuit ruling was in Serta, not Incora. Sources differ on scope: Greenberg Traurig says the bankruptcy court found breaches of multiple indentures, including a pro rata breach from sponsor purchases. Patterson Belknap, Mayer Brown and Kobre & Kim say no breach of the 2024 indenture and a breach of the 2026 indenture. Left out of the summary. Greenberg Traurig reports that the sponsor bought notes from participating holders in breach of a pro rata affiliate-purchase clause. Not corroborated, so not used in the mechanics. How the $525mm 2027 unsecured notes were treated in 2022, and whether they were exchanged into the 1.25L notes, was not confirmed. Bond price moves and percentage recoveries for the excluded holders were not found. The identities of the majority-group holders were not confirmed in the sources reviewed. The Fifth Circuit has not been confirmed to have ruled (argued November 2, 2026).
Sources: Patterson Belknap - Federal District Court Ruling Upholds Uptier Transactions · Mayer Brown - The State of Play on Uptiers: District Court Reversal in Wesco Blesses Multistep Transactions (Jan 2026) · Cleary Gottlieb - District Court Reverses Bankruptcy Court in Wesco/Incora LME · Octus - Fifth Circuit oral argument in Incora/Wesco appeal · Greenberg Traurig - Serta, Mitel and Incora's Potential Impact on Uptiers · BNN Bloomberg - Incora judge says $250 million funding was flawed
At Home Group double-dip and secured exchange2023 · double-dip
In May 2023 a new Cayman subsidiary of At Home sold $200m of 11.5% secured notes and lent the cash to the parent on a secured intercompany note pledged to the noteholders, while the parent and domestic guarantors also guaranteed the notes, giving the new lenders two pari passu first-lien claims, and at the same time about $447m of unsecured notes were exchanged at 90% of par into about $412m of new pari first-lien notes. Existing first-lien holders were diluted, and by May 2025 the term loan traded around 27 while the Cayman notes traded near 70. At Home filed Chapter 11 in June 2025, the DIP took about 98% of the new equity, and the confirmed plan capped combined double-dip recovery at 100% without any court ruling on the structure.
How it worked
- Before the deal: ABL facility, $600m first-lien term loan (SOFR+425), $300m 4.875% senior secured notes due 2028, $500m 7.125% senior unsecured notes due 2029.
- Step 1: At Home formed At Home Cayman, a new Cayman Islands entity outside the guarantor group. Sources describe it as a non-guarantor restricted subsidiary and assume it had no operating assets.
- Step 2: At Home Cayman sold $200m of 11.5% senior secured notes due 2028 in a 144A private placement. The buyers were holders of the existing unsecured notes.
- Step 3: At Home Cayman lent the net proceeds to the parent, At Home Group Inc., under a secured intercompany note (claim 1).
- Step 4: At Home Group and certain domestic restricted subsidiaries guaranteed the Cayman notes on a secured basis (claim 2). The Cayman entity pledged its intercompany receivable to the Cayman noteholders, so the noteholders held both claims.
- Step 5: At the same time, about $447m of the 7.125% unsecured notes were exchanged at 90% of par plus accrued interest for about $412m of new 7.125%/8.625% cash/PIK toggle senior secured notes due 2028. The parent issued these directly. Roughly $58m of unsecured notes stayed out.
- Ranking: the Cayman notes (through both claims) and the new exchange notes sat pari passu with the existing term loan and 4.875% secured notes on the same first-lien collateral. The existing first-lien lenders were diluted, not formally subordinated.
- Chapter 11 (June 2025): the DIP had $200m new-money first-out plus a $400m roll-up of pari first-lien claims. The interim roll-up gave priority to the Cayman notes. The DIP converted into about 98% of the new equity, and the remaining pari first-lien classes split about 2%.
Baskets used
- Ability to put the issuing entity outside the guarantor group as a non-loan-party restricted subsidiary. Commentary says a non-guarantor restricted subsidiary needs debt and lien capacity in the existing documents, while an unrestricted subsidiary does not.
- Debt and lien capacity for the parent and domestic guarantors to give secured pari first-lien guarantees of the Cayman notes. Guarantees count as debt, and often as investments too.
- Separate debt and lien capacity for the secured intercompany note from the parent to the Cayman entity. A standard intercompany debt basket that requires subordination cannot be used for this.
- First-lien pari passu secured debt capacity (and room under the intercreditor agreement) for the roughly $412m secured exchange notes that replaced unsecured notes.
- The exact At Home baskets and dollar capacity have not been publicly confirmed, because the loan documents are not public. See uncertain.
What creditors lost
Existing pari first-lien holders ($600m term loan, about $579m at filing, and the $300m 4.875% secured notes) were diluted in three ways. $200m of new first-lien money held two claims on the same collateral. About $412m of former unsecured debt moved up to pari first lien. And on the 90% exchange, the unsecured holders who took part gave up only about $35m of face to move up. In May 2025 the term loan and old secured notes traded around 27 and the exchange notes around 27, while the Cayman notes traded near 70. Debtwire said that gap may reflect the market expecting a better recovery for the double-dip holders. In Chapter 11, first-lien holders who were not in the DIP were left with a share of about 2% of the new equity, since the DIP took about 98%. Octus said intercompany claimholders and others outside the ad hoc group were shut out of the DIP syndication. Old equity (over 99% H&F) got nothing.
Outcome
At Home skipped a May 15, 2025 interest payment, signed a forbearance agreement, and filed prepackaged-style Chapter 11 in the District of Delaware (Case No. 25-11120) on June 16, 2025, with an RSA backed by about 96% of first-lien holders. The plan cut about $1.62bn of roughly $2bn of funded debt. Cayman notes claims went into Class 4 and intercompany note claims into Class 5, and Class 5 recovers only until the Cayman notes are paid in full, so the double-dip cannot pay more than 100%. Nobody challenged the double-dip claim, so there is no court ruling on whether it holds up. The plan was confirmed around September 29-30, 2025 and took effect on October 24, 2025. The lenders (Redwood, Farallon, Anchorage and others) took ownership.
The blocker it led to
The "At Home blocker" (named in 2023, per Cleary Gottlieb) targets layered intercompany claims, double-dips and pari-plus deals. It bars non-guarantors from holding liens on assets or equity of the borrower or restricted subsidiaries, and from holding debt of the borrower or restricted subsidiaries. It bars unrestricted subsidiaries from being co-obligors on debt the borrower group owes. It also bars pari passu secured debt from getting liens on non-collateral assets or guarantees from non-guarantors. Borrowers often negotiate it back toward unrestricted subsidiaries only, and carve out intercompany debt owed to non-guarantor restricted subsidiaries if that debt is unsecured or subordinated.
What to look for
- Whether a newly formed non-guarantor restricted subsidiary (especially a foreign one) can incur secured debt, and how much non-guarantor debt and general lien capacity exists on day one.
- Whether intercompany loans owed by loan parties to non-loan parties must be unsecured or subordinated, and whether the borrower can secure such loans pari passu under other baskets.
- Whether loan parties can guarantee non-guarantor subsidiary debt on a secured basis. Check the guarantee/investment basket sizes and whether an At Home-style blocker bans non-guarantors from holding loan-party debt or liens.
- Pari passu first-lien ratio or incremental capacity that would let unsecured notes be exchanged into secured debt, plus intercreditor terms on DIP participation rights.
Not confirmed: The research input for this deal was cut off after its first source, so the other sources it cites (Debtwire, Octus, Cleary Gottlieb and the plan documents) and its original uncertain list did not come through and should be re-pulled before relying on the trading prices, plan terms and blocker attribution. The exact At Home baskets and dollar capacity are not public because the loan documents are not public.
Sources: At Home Announces Completion of $200 Million Private Placement and Related Transactions (Business Wire, May 12, 2023, syndicated copy)
Sabre 2023 SPV / intercompany-loan financing (Centerbridge-led), often called a double-dip or pari-plus deal2023 · double-dip
On June 13, 2023, Sabre turned down a financing proposal from its existing term lenders. It instead took $700 million from lenders led by Centerbridge, routed through a new SPV, Sabre Financial Borrower LLC ("Sabre FB"), which Octus describes as an unrestricted subsidiary. Sabre FB lent the full $700 million to Sabre GLBL as an intercompany loan, and that loan sits pari passu, on the same first-lien collateral, with Sabre GLBL's existing term loans and secured notes.
How it worked
- Step 1: Sabre set up Sabre Financing Holdings LLC and its subsidiary Sabre Financial Borrower LLC (the SPV). Octus calls the SPV an unrestricted subsidiary, and the Pari 1L credit agreement has a schedule listing Unrestricted Subsidiaries.
- Step 2: On June 13, 2023, the SPV borrowed $700 million under a new term loan from Centerbridge-led lenders, with Wilmington Trust as agent and a December 15, 2028 maturity.
- Step 3: The SPV lent the $700 million to Sabre GLBL under the 'New Pari 1L' intercompany loan. That loan is secured by first-priority liens on the same collateral as the existing senior secured credit facilities and notes, and ranks pari passu with them.
- Step 4, first dip: the SPV pledged its intercompany receivable plus all its assets, and Holdings' assets, to the new lenders. That gives them, through the SPV, a first-lien claim against the restricted group.
- Step 5, second dip: foreign subsidiaries in Luxembourg, the UK, Singapore, Australia, Poland, the Netherlands, Iceland and Uruguay guaranteed the new term loan directly. The guarantee is capped at $400 million plus accrued interest, is secured by their material assets, and is backed by a covenant to keep at least $100 million of cash in those foreign subsidiaries.
- Step 6: Sabre GLBL used the proceeds to repurchase 9.25% secured notes due 2025 in a cash tender, plus about $15 million of 2021 Term Loan B-1.
- Pricing: a floating rate set off Sabre's own secured-debt yields, deemed 13% for the first period, floor 11.5% cash / 13% PIK, cap 17.5% cash / 19% PIK. PIK is allowed through December 31, 2025. Make-whole for 2 years, par after year 3.
- Exit: in 2025 Sabre GLBL issued $1.325 billion of 11.125% secured notes due 2030. Part of the proceeds prepaid an intercompany loan, which fully repaid a secured term loan due 2028.
Baskets used
- Pari passu first-lien debt and lien capacity under Sabre GLBL's existing credit agreement and indentures, which allowed a new $700 million intercompany loan sharing the existing collateral.
- Unrestricted-subsidiary designation or investment capacity for the SPV borrower (per Octus). The SPV was outside the covenant group, so its own term loan and pledge were not limited by the existing documents.
- Capacity for non-guarantor (foreign) restricted subsidiaries to guarantee and secure other debt, used here up to the $400 million Subsidiary Cap. The exact basket names are not confirmed in the sources reviewed.
What creditors lost
Existing first-lien term lenders and secured noteholders now share their collateral pari passu with a new $700 million claim, which grows if interest is paid in kind. On top of that, the new lenders hold a structurally senior claim of up to $400 million plus interest on foreign subsidiaries that do not guarantee the existing debt. Octus said the new loan dilutes the existing loan's claim on domestic assets through PIK interest and the make-whole, and is senior to it at the foreign non-guarantor subsidiaries. The existing term lenders had offered their own financing, which Sabre rejected, so they were left out of the better-protected tranche. No market price change for the existing debt was found in the sources reviewed.
Outcome
No litigation or bankruptcy was reported. Sabre kept refinancing through 2024 and 2025: a $775 million term loan exchange to 2029 in December 2024, a sale of Hospitality Solutions to TPG for $1.1 billion that closed July 3, 2025 and repaid about $825 million of debt, and $1.325 billion of 11.125% notes due 2030 whose proceeds partly prepaid an intercompany loan and fully repaid a term loan due 2028. Creditflux noted that no bankruptcy court has ruled on a double dip used purely for liability management, so the structure's validity is untested.
The blocker it led to
No source reviewed names a blocker added in response to Sabre specifically. The protections that would apply are the general double-dip / pari-plus ones: limits on non-guarantor subsidiaries guaranteeing or securing other debt, limits on intercompany loans owed to unrestricted subsidiaries or SPVs that carry pari liens on the collateral, and J.Crew-style limits on designating and investing in unrestricted subsidiaries. Treat this as general market practice, not a reported Sabre-specific outcome.
What to look for
- Non-guarantor and foreign subsidiary capacity: how much debt, and how many guarantees and liens of other debt, subsidiaries outside the guarantor group may take on. That amount is the size of a possible second dip (Sabre's was capped at $400 million).
- Whether an unrestricted subsidiary or SPV may lend to the borrower on a pari passu secured basis. Check the pari debt and lien capacity, the definition of permitted pari passu debt, and whether intercompany debt owed to an unrestricted subsidiary counts against those baskets.
- Investment capacity into unrestricted subsidiaries, how the designation conditions work, and whether there is a clause stopping unrestricted subsidiaries from holding claims against loan parties.
- Whether the guarantor coverage test excludes foreign subsidiaries. If they sit outside the collateral, check how much EBITDA and cash they hold and whether anything stops them guaranteeing new debt.
Not confirmed: Unrestricted status of the SPV: Octus calls Sabre FB an unrestricted subsidiary, but Sabre's own 8-K and 10-Q describe it only as a wholly owned or indirect consolidated subsidiary. How to label the deal: Creditflux calls it a double dip, while an Octus/Reorg piece says Sabre is more properly a pari-plus financing. Size of the note buyback: the 8-K says $670 million of 9.25% 2025 notes; the 10-Q and search summaries say $650 million. Deal size: initially announced as $665 million and closed at $700 million. Repayment link: that the term loan due 2028 repaid in 2025 is this Centerbridge facility rests on matching maturity dates; no source reviewed states it explicitly. Exact basket names: the specific covenant baskets used in the existing documents were not confirmed from primary text. The Octus analysis is paywalled. Price impact on existing debt: no reported price move for the existing term loans or notes was found. Research was stopped short: the web search budget ran out before Sabre's own 2025 filings could be checked on the repayment.
Sources: Sabre 8-K, June 2023 (Item 1.01, Term Loan and New Pari 1L agreements) · Sabre Form 10-Q Q3 2023 · Octus: Sabre declines existing lenders' proposal, moves ahead with Centerbridge · Octus article (July 7, 2023) on double dips, Sabre unrestricted sub term loan · Reorg/Octus: Double Dips vs Pari Plus · Creditflux: Creditors try double dips to raise recoveries · ABF Journal: Centerbridge leads $665mm credit facility for Sabre · Centerbridge: Sabre completes private financing · Panabee: Sabre 11.125% notes fund refinancing (2025) · Sabre 8-K Q3 2025 results · Hotel Management: Sabre to sell hospitality business to TPG for $1.1B
Trinseo double-dip (with AmSty drop-down), then the 2025 follow-on LME2023 · double-dip
On September 8, 2023, Trinseo faced 2024 term loans and 2025 notes coming due. Its answer was to have a new SPV outside the existing credit group (Trinseo Luxco Finance SPV, with Trinseo NA Finance SPV as co-borrower) borrow about $1.077bn from a private credit group that included Oaktree and Apollo, at SOFR+8.50%, due 2028. The SPV lent most of that money ($948mm) down to the existing OpCo borrowers as a new "2023 Term Loan" under the existing credit agreement.
How it worked
- July 2023: Trinseo LLC, a guarantor under the existing (OpCo) credit agreement, moved the 50% AmSty JV interest out of the credit group into Trinseo NA Finance SPV LLC, which was designated an unrestricted subsidiary. One Reorg estimate put the drop-down capacity at about $377mm; a later piece said just over $500mm of investment capacity was enough.
- Sept 8, 2023: Trinseo Luxco Finance SPV S.a r.l. (Lux Borrower) and Trinseo NA Finance SPV LLC (Co-Borrower), both outside the existing credit group, borrowed a $1,077mm senior secured term loan due May 3, 2028 at Term SOFR+8.50%, with Alter Domus as agent. Reported tranches: $128.8mm Tranche A and $948.3mm Tranche B.
- Dip 1 (intercompany claim): $948mm was lent to the OpCo borrowers as new '2023 Term Loans' under the existing credit agreement, documented as an 'Incremental and Refinancing Amendment' at SOFR+9.66% due 2030. These loans were secured pari passu on the same collateral and guaranteed by the same guarantors as the existing debt. The Lux Borrower pledged its rights in these loans to the new lenders.
- Dip 2 (direct guarantees): the new facility was guaranteed by Trinseo Luxco S.a r.l. and Trinseo NA Finance LLC. Restricted subsidiaries that did not guarantee the existing debt gave a limited secured guaranty (estimated about $352mm). The AmSty-holding unrestricted subsidiary also guaranteed, which gave the new lenders first claim on AmSty value. AmSty sale proceeds and extraordinary dividends had to prepay the new loan.
- About $125mm went to the OpCo borrower as an equity contribution plus intercompany loan to prepay the 2018 term loans due 2024 and to redeem $385mm of the $500mm 2025 senior notes at par, leaving a $115mm stub.
- 2025 follow-on (consents announced Jan 15, 2025): a $115mm Tranche C incremental term loan at Luxco took out the 2025 stub. 2029 notes were exchanged at about a 15% discount into new 2L 'Super HoldCo' notes issued by Luxco/NA Finance, with 99.88% consent. Aristech Surfaces and Altuglas were designated unrestricted and guaranteed only the 2028 Refinance Credit Agreement. A new $300mm revolver due 2029 was put ahead of the intercompany loans, and the intercompany loans were upsized by nearly $500mm per the plaintiffs.
Baskets used
- Unrestricted-subsidiary designation plus investment / restricted-payment capacity to move the AmSty JV stake out of the credit group (debtors argued RP capacity was sufficient; plaintiffs called it 'fictional basket capacity').
- Incremental and refinancing term loan provisions in the existing credit agreement (including 'Refinancing Equivalent Debt' per Reorg), used to bring the $948mm intercompany loan in pari with the existing first lien.
- Capacity for restricted non-guarantor subsidiaries to guarantee and secure other debt (about $352mm estimated).
- Plaintiffs argue the $375mm general new-debt basket was far short of the $1.077bn raised. The exact basket mapping is disputed.
What creditors lost
Existing OpCo first-lien term lenders (the 2028 TLB, about $724-750mm) saw a new $948mm claim added pari to their collateral. Their pool was also reduced: AmSty (valued around $500mm by one analysis) left in 2023, and Aristech Surfaces (acquired for $445mm, about $50mm EBITDA) and Altuglas left in 2025. On top of that, a $300mm revolver was primed ahead of them. Unsecured 2025/2029 noteholders were effectively primed by the secured intercompany debt and the drop-down. 2029 holders later took about a 15% haircut in the exchange into 2L notes. In Chapter 11, about $1.508bn of intercompany claims were allowed in the same class as the OpCo term loans, outvoting the excluded lenders. Those lenders hold about $293.7mm, roughly 40% of the external OpCo tranche, and say the plan impairs over $700mm of OpCo term loans. The new lenders, through the intercompany claim, also capture their pro rata share of the $35mm OpCo exit distribution via a carve-out to supporting lenders. S&P said the 2023 structure lowered recovery prospects for existing debt.
Outcome
Trinseo did not litigate in 2023; it did a second LME in late 2024 / January 2025 and was left with about 11x leverage. It skipped a roughly $38mm interest payment in 2026 and filed a prepackaged Chapter 11 on May 26, 2026 (S.D. Tex.), backed by a May 13 RSA, to discharge about $2bn of debt. Lenders get nearly all the equity, trade claims are unimpaired, and DIP financing was approved June 17. Excluded OpCo lenders (CastleKnight group) filed an adversary complaint on May 29, 2026, seeking to void the 2023 and 2025 LMEs, recharacterize the intercompany loans as equity, or subordinate them. On July 30, 2026, the court refused to dismiss Counts I-III. Trial and confirmation arguments ran August 12-19, the matter was taken under advisement, and mediation was ordered around September 15. As of October 13-19, 2026, no ruling or confirmation order had been reported.
The blocker it led to
No standard market-wide 'Trinseo blocker' is named in the sources. The 2025 documents themselves added an 'Envision'-style blocker in the new $300mm revolver, limiting drop-downs to the general investments basket, and later commentary says the post-LME documents largely shut down another aggressive move. More broadly, the double-dip that Trinseo and Wheel Pros popularized is what lenders now try to block. They do it with caps on non-guarantor guarantees and liens, limits on pari intercompany loans owed to non-loan-party financing SPVs, and J.Crew-style limits on moving material assets to unrestricted subsidiaries.
What to look for
- Can a non-loan-party or unrestricted SPV lend into the credit group as pari secured incremental or refinancing debt? Check the incremental and 'refinancing equivalent debt' definitions and whether the lender must be a third party.
- Size the day-one capacity to move assets out: unrestricted-sub investment basket, general investments basket, RP builder, and any J.Crew / Envision-type blocker limiting material assets (JV stakes included) leaving the group.
- How much guarantee and lien capacity non-guarantor restricted subsidiaries have for other debt (Trinseo's was about $352mm), and whether guarantees by unrestricted subs of other debt are restricted.
- Voting: whether intercompany or affiliate-held loans can vote in Required Lender or plan classes, and whether no-action or intercreditor clauses waive challenges.
Not confirmed: Label: commonly called a 'double-dip', but the lenders' own counsel described it as a 'novel triple-dip structure' (BankruptcyData). I treated it as a double-dip plus an AmSty drop-down. Basket capacity for the AmSty drop-down: Reorg cited about $377mm estimated capacity, while a later piece said just over $500mm of investment capacity. The exact basket (investment vs RP) is disputed in litigation. AmSty value: about $500mm (Restructuring Interviews) vs a $210.2mm carrying value for the JV investment (Panabee). Size of the existing 2028 TLB: $750mm original (10-K) vs $724mm outstanding (Restructuring Interviews). Size of the 2025 intercompany upsizing ('nearly $500mm', from the plaintiffs via Octus) and the 2L note face (at least $280mm, an estimate) are not independently confirmed. Final outcome: no confirmation ruling or mediation result was found as of mid-October 2026. A Cleary appendix entry suggesting dismissal of contract claims could not be confirmed. DIP size is reported differently ($158mm, $427.5mm, $433mm), likely from counting different facilities. I could not access S&P's recovery-rating details (403), so the specific recovery-rating changes are not stated.
Sources: Trinseo PLC Form 8-K (Sept 2023 financing) · Trinseo PLC Form 10-K FY2023 · Trinseo PLC Form 10-Q Q2 2026 · Restructuring Interviews: Trinseo's Restructuring, Doubling Down on Double-Dips · Reorg/Octus: Trinseo new financing (Sept 2023) · S&P: Creative structuring helps Trinseo, lowered recovery prospects · Octus: Trinseo excluded OpCo lender group sues to invalidate double dip LME · BankruptcyData: Trinseo closing arguments, CastleKnight challenges · Financier Worldwide: Trinseo files for Chapter 11 to cut $2bn debt · Elevenflo: Trinseo prepackaged plan case summary · Panabee: Trinseo files Chapter 11 · Panabee: Trinseo skips $38 million interest payment · Reorg webinar: Differentiating Double Dips, Trinseo and Wheel Pros
Robertshaw: May 2023 uptier, then the December 2023 fight over who controlled the lender vote2023-2024 · uptier (non-pro-rata priming exchange)
Robertshaw had a 2018 LBO debt stack of $510M first-lien and $110M second-lien term loans. In May 2023 it did an uptier. A lender group (Invesco plus Bain Capital, Canyon Capital and Eaton Vance) put in $95M of new super-priority first-out money under a new Super-Priority Credit Agreement (SPCA).
How it worked
- Starting point: $510M first-lien and $110M second-lien term loans from the 2018 acquisition financing.
- May 2023: a new Super-Priority Credit Agreement (SPCA) was signed. Participating lenders provided $95M of new first-out money.
- Also in May 2023, participating lenders exchanged their existing first- and second-lien loans for second-out and third-out loans under the SPCA. Those loans rank ahead of the lenders who did not take part.
- SPCA 'Required Lenders' means lenders holding more than 50% of the first-out new money loans plus the second-out loans combined.
- July 2023: Invesco acquired more than 50% of first-out plus second-out, which made it Required Lender. It held a majority of the first-out but not of the second-out, so the court called its position arguably fragile.
- Invesco signed Amendments 1 to 4 and directed the agent not to post them to the other lenders.
- December 11, 2023: the other lenders and One Rock lent $228.3M to RS Funding, a new entity whose economics belonged to Robertshaw but whose voting stock sat with a parent. The point was to keep it outside the debt covenant's 'Subsidiary' definition.
- RS Funding passed the money to Robertshaw. Robertshaw prepaid about $117.6M of first-out loans plus about $30.7M of make-whole, and paid off a $30M ABL. Invesco received more than $90M.
- After the prepayment the register showed the other lenders as Required Lenders. They passed Amendment No. 5 to allow $228M of incremental debt, and Robertshaw issued $218M of new first-out and second-out loans to repay RS Funding.
- The SPCA had an 'Incora blocker' sacred right that barred amendments authorizing debt in order to influence the voting threshold. The court held it was not triggered, because the voluntary prepayment shifted the vote, not Amendment No. 5.
Baskets used
- Required Lenders amendment power: a simple majority (more than 50% of first-out plus second-out) could amend the SPCA, which in December 2023 let the new majority approve Amendment No. 5.
- Voluntary prepayment provision: it allowed non-pro-rata targeting of first-out loans, the class where Invesco held its majority, to change who held the vote.
- Debt covenant (Section 6.01) and the 'Subsidiary' definition: the structure depended on an entity with no voting equity owned by the borrower sitting outside the covenant. The court rejected this.
- Uptier itself (May 2023): a new super-priority facility plus an exchange offered only to participating lenders. The sources do not say which exact amendment or open-market purchase clauses the May deal relied on.
What creditors lost
Lenders left out of the May 2023 uptier fell behind $95M of new first-out money and behind the exchanged second-out and third-out loans of the participants. A Guardian Life-led group sued in December 2023 and alleged it had been diluted out. In the December 2023 deal, Invesco lost Required Lender control. It was cashed out of about $117.6M of first-out loans, plus make-whole, by a forced prepayment, and lost the right to direct the credit bid and the case. Its later breach claim was allowed at $50M but only as an unsecured claim. Debtors estimated that class recovers about 3%, and ad hoc group counsel put Invesco's payout at about $30,000.
Outcome
Chapter 11 filed February 15, 2024. On June 20, 2024, Judge Lopez held that Robertshaw breached the debt covenant because RS Funding was a Subsidiary. He found no breach by the other lenders and no tortious interference by One Rock, and he dismissed the implied covenant claim. The only remedy was a prepetition money damages claim: no rescission, no restoration of Required Lender status, no equitable subordination. The court said there was no default blocker or 'null and void' language in the covenant. The sale order for the credit bid by the first-out ad hoc group and One Rock was entered June 21, 2024. On August 21 the court classified Invesco's claims as unsecured. The liquidation plan was confirmed August 16, 2024. Invesco appealed. Law360 reported the sale closed hours before a Fifth Circuit stay, with the effective date around October 1-4, 2024.
The blocker it led to
The SPCA already had an 'Incora blocker' that made it a sacred right to stop debt being authorized in order to change the voting threshold. It failed because the vote moved through a voluntary prepayment, not through the debt amendment. The fixes the case points to: (1) make covenant-violating debt or transfers 'null and void' and include a default blocker, so a court can unwind them instead of awarding only damages; (2) make the Subsidiary definition cover any entity the borrower owns economically, whatever the voting structure; (3) widen anti-vote-manipulation sacred rights to cover prepayments, repurchases and other moves that shift Required Lender status, and require pro rata prepayment across lenders; (4) Serta-style protections against non-pro-rata uptiers, which 9fin says are now common alongside J.Crew blockers.
What to look for
- The 'Required Lenders' definition and the sacred rights list: is subordination of liens or payment, or a change to pro rata sharing, an all-affected-lender vote, or can a bare majority approve it? And does any anti-vote-manipulation protection cover prepayments and repurchases, not just new debt?
- The voluntary prepayment and open-market purchase language: can the borrower prepay or buy back one class or one set of lenders non-pro-rata, which lets a borrower-friendly group engineer who holds the vote?
- The 'Subsidiary' and 'Restricted Subsidiary' definitions: does an entity that is economically owned but has no voting equity owned by the borrower, or a newly formed financing vehicle, fall outside the debt and lien covenants?
- Whether the debt, lien and asset-transfer covenants say that a violating transaction is 'void' or 'null and void', or only give rise to an Event of Default. Robertshaw shows that without that language the likely remedy is an unsecured damages claim.
Not confirmed: The court ruling was about the December 2023 RS Funding prepayment and vote-flip transaction, not the May 2023 uptier itself. The task label '2023-2024 uptier and the court ruling' merges two separate events. The exchanged amounts in the May 2023 uptier are not reported consistently. One search summary cited $370M of second-out and $65M of third-out loans, but I could not confirm that in a primary source. Whether the May 2023 uptier used open-market purchase language or majority amendments to subordinate non-participants is not stated in the sources I read. The Guardian Life-led excluded-lender suit: its claims are allegations, and I did not find how it was resolved. The size of the December transaction is reported variously as $228M (Paul Weiss and the opinion, for the RS Funding loan and the Amendment No. 5 capacity) and $218M (CreditSights headline, and the opinion's figure for the debt actually issued). Invesco's damages: it estimated about $40M, the allowed unsecured claim was reported as $50M, and the reported recovery is about 3% (debtors) or about $30,000 (ad hoc group counsel, one party's characterization). Exact sale-closing and effective dates and how the Fifth Circuit appeal ended: Law360 headline dated about October 4, 2024; Elevenflo lists the effective date as October 1, 2024. Not confirmed from the docket. One search summary said the ruling came in August 2024; the opinion is dated June 20, 2024, and August 21, 2024 was the separate secured-versus-unsecured claim ruling.
Sources: Paul Weiss: Texas Bankruptcy Court Rules on Liability Management Transactions and Required Lender Status · In re Robertshaw US Holding Corp., Bankr. S.D. Tex. opinion (FindLaw) · 9fin: Robertshaw its own white knight - Understanding the decision · Octus: Robertshaw stay hearing / Invesco $50M unsecured claim · Octus: Robertshaw credit bid sale approved · PEI Private Credit: Creditor-on-creditor violence erupts again in Robertshaw lenders lawsuit · Guardian Life v. Robertshaw complaint (NY Sup. Ct. 655979/2023) · Law360 case page: Robertshaw closes Ch. 11 sale hours before 5th Circ. stay · Elevenflo: Robertshaw bankruptcy case profile (confirmation/effective dates) · Schulte Roth & Zabel: SD Texas court finds transactions violated credit agreement but awards only unsecured claim
Pluralsight IP drop-down and lender takeover2024 · drop-down to non-guarantor restricted subsidiary
Vista took Pluralsight private in 2021. The buyout was funded by direct lenders led by Blue Owl, using a recurring-revenue term loan. By spring 2024 the business was struggling.
How it worked
- Background: in April 2021 Vista took Pluralsight private at about $3.5 billion, according to Goodwin; Reuters says $3.9 billion. Goodwin reports a $1.175 billion recurring-revenue term loan and a $100 million revolver. Reuters and KBRA say more than $1.5 billion of debt in total.
- Earlier stress: in Q1 2023 Vista asked lenders to loosen covenants and put in $75 million of equity. In 2024 Pluralsight also borrowed $162.5 million under a subscription line from Vista's fund, according to Reuters.
- Step 1 (around May 2024): Pluralsight moved certain IP into a new wholly owned subsidiary. Debtwire says the subsidiary was restricted but not a guarantor. As a restricted subsidiary it was still bound by the covenants of the original loan.
- Step 2: the new subsidiary signed a financing with Vista. Vista provided about $50 million as a loan or preferred equity, with sources differing on which. Because Vista invested at the level of the subsidiary that owned the IP, its claim on those assets ranked structurally ahead of the existing lenders' claim.
- Step 3: the proceeds paid an interest payment owed to Pluralsight's existing lenders. In effect, the lenders' own collateral was used to fund their coupon.
- Step 4 (August 2024): the lenders took control. About $1.2 billion of debt became equity, with lenders owning about 85% and management about 15%; Goodwin reported 100% lender ownership. The lenders committed roughly $275 million of new money, of which $125 million was funded right away. Vista was reportedly repaid its $50 million.
Baskets used
- The specific baskets are not public, because the credit agreement is a private direct-lending document. KBRA says only that the credit agreement allowed the step, and Reuters-sourced coverage says Vista acted within its rights.
- Likely route, my inference and not confirmed by sources: the investment capacity for restricted non-guarantor subsidiaries, plus capacity for those subsidiaries to raise their own debt or preferred equity. Using a restricted subsidiary rather than an unrestricted one meant the IP stayed inside the covenant group, so a J.Crew blocker aimed only at unrestricted subsidiaries would not have stopped it.
What creditors lost
Some of the IP moved beyond the existing lenders' direct guarantee and collateral claim. Vista's roughly $50 million then ranked ahead of the lenders on those assets. BDCs had already marked the first lien down before the move. KBRA shows Blue Owl BDCs going from about 96.75 to 83.5 of par between 4Q23 and 1Q24, and Goldman Sachs BDC going from about 95 to 88. KBRA counted about $700 million of BDC first-lien exposure at fair value. The lenders were left out of the new subsidiary financing. In the end they swapped about $1.2 billion of debt for equity and had to add roughly $250 to $275 million of new money. Vista and its co-investors reportedly lost about $4 billion of equity.
Outcome
There was no litigation and no bankruptcy. The drop-down was a stopgap. In August 2024 the lenders, led by Blue Owl and Ares, took the keys out of court through a debt-for-equity swap. Reports say the assets were never moved out of creditors' reach in a lasting way, and Vista's $50 million was reportedly repaid as part of the takeover.
The blocker it led to
"Pluralsight protection": a clause that stops material IP or key assets from going to non-guarantor subsidiaries, including restricted ones, not just unrestricted ones. Lenders also proposed caps on asset transfers to non-guarantors and a defined list of material or key assets. Debtwire describes this as a widening of the J.Crew blocker, sitting alongside the Chewy and Serta style protections. Debtwire also notes that competition among lenders has watered these demands down.
What to look for
- Does the J.Crew blocker cover transfers of material IP to any non-guarantor subsidiary, or only to unrestricted subsidiaries?
- Size the investment capacity for restricted non-guarantor subsidiaries: the general basket, the builder basket, and any uncapped intercompany investment permissions.
- Can a non-guarantor restricted subsidiary incur debt or issue preferred equity, especially to the sponsor or its affiliates? Is affiliate debt excluded from the restrictions?
- Do the affiliate-transaction covenant and the asset-sale covenant actually catch a sponsor-funded financing at the subsidiary level?
Not confirmed: Restricted or unrestricted subsidiary: Debtwire, Goodwin and Bloomberg-sourced coverage say restricted but not a guarantor. A CreditSights headline says unrestricted. The task describes an unrestricted subsidiary, but the weight of sources says restricted. Form of Vista's $50 million: sources disagree on whether it was a loan or preferred equity. Whether the $50 million of new financing is the same as the $50 million interest payment reported by WealthManagement/Bloomberg is not stated. Goodwin says the proceeds funded the interest payment. Purchase price: about $3.5 billion according to Goodwin and Bloomberg, $3.9 billion according to Reuters. Original debt: $1.175 billion term loan plus $100 million revolver according to Goodwin; more than $1.5 billion according to Reuters and KBRA. Debt reduction: $1.2 billion according to Bloomberg and PE Wire, $1.3 billion according to Goodwin. New money: $250 million according to Goodwin, about $275 million according to PE Wire. Ownership: 85% lenders and 15% management according to PE Wire and Bloomberg; 100% lenders according to Goodwin. The specific covenant baskets and dollar capacity used are not public. Exact date of the IP transfer: Reuters cites KBRA for May 2024, but the KBRA release itself gives no date.
Sources: Debtwire / ION: Direct lenders debate new protections to avoid being Pluralsight-ed · Goodwin: Pluralsight change of control transaction · WealthManagement (Bloomberg): Private Credit, Wall Street's Hottest Trade, Has an Ugly Moment · Reuters via Yahoo: Vista Equity in talks to hand over Pluralsight to creditors · KBRA: Private credit impact of Pluralsight's potential restructuring · Private Equity Wire: Vista and co-investors take $4bn hit in Pluralsight restructuring · Bloomberg: Blue Owl-led private debt group takes ownership of Pluralsight · CreditSights: Pluralsight raises preferred equity, conducts drop-down LME (headline only)
Del Monte Foods drop-down and non-pro-rata exchange2024 · drop-down to unrestricted subsidiary
In August 2024 Del Monte Foods ran a deal with an ad hoc group holding about 57% of its term loan. It moved substantially all its assets, first to a non-guarantor restricted subsidiary (DM Intermediate) and then to a new unrestricted subsidiary, Del Monte Foods Corp. II (DMFC).
How it worked
- Step 1: Del Monte Foods moved substantially all its assets to DM Intermediate, a restricted subsidiary that did not guarantee the loan. Del Monte Pacific held preferred stock in DM Intermediate (Octus).
- Step 2: DM Intermediate passed the assets on to a newly formed unrestricted subsidiary, Del Monte Foods Corp. II (DMFC), which sat outside the old lenders' collateral and guarantee package (Octus; Cadwalader/HLC).
- Step 3: DMFC took a new credit agreement secured by the moved assets, with $240 million of new money (Octus).
- Step 4: The ad hoc group (about 57% of the term loan) provided the first-out new money and exchanged its old loans at par into second-out debt (Octus).
- Step 5: Other lenders could exchange 30.5% of their loans into second-out only if they also put up first-out new money; the rest of their loans went into third-out (Octus).
- Result at DMFC: $236 million first-out, $468.8 million second-out and $135 million third-out (Cadwalader/HLC).
- Lenders who did not exchange stayed at the old borrower. Their claim was now backed only by stock of the company, DM Intermediate and the parent guarantors, and sat structurally behind the DMFC debt (Octus).
Baskets used
- Uncapped basket for investments in non-guarantor restricted subsidiaries, used to move the assets to DM Intermediate (Octus).
- Trapdoor basket that lets investments held by non-guarantor restricted subsidiaries be passed to unrestricted subsidiaries, with no cap (Octus). By comparison, Octus says J.Crew's baskets were capped at $150 million and $100 million.
- Open-market-purchase exception to pro rata sharing, used to make the exchange non-pro-rata (Octus). Octus calls this route now defunct after the Fifth Circuit's Serta ruling.
- No amendment was needed, so sacred-rights votes were never triggered (Octus).
What creditors lost
Excluded lenders were about 15% of the term loan. They lost their first-lien claim on the operating assets and were left with a stock pledge, sitting behind about $1.2 billion of debt secured by the former collateral (Octus). The original first-lien term loan was $725 million (Friedman Kaplan). Even lenders who took part but did not provide new money got only 30.5% into second-out and the rest into third-out. The ad hoc group, by contrast, rolled all of its loans into second-out (Octus). The settlement later paid the excluded litigants par: $102 million plus $20 million of expenses (Octus).
Outcome
Excluded lenders named Black Diamond Commercial Finance as successor agent and declared defaults. They tried to replace the board by voting the pledged stock and filed a Section 225 action in Delaware Chancery in October 2024, before Vice Chancellor Will. The court entered a status quo order. The main question was whether DM Intermediate counted as a "Credit Party." After a two-day trial in February 2025, the parties settled on April 9, 2025, before closing arguments. The company bought the excluded loans at par for $102 million plus $20 million of expenses. It paid with a $122 million incremental first-out loan from the participating lenders (Octus; Friedman Kaplan). Del Monte filed Chapter 11 in the District of New Jersey on July 1, 2025 (Octus). Its DIP had $165 million of new money and rolled up $247.5 million of first-out debt. Minority lenders challenged the roll-up. On May 11, 2026, Judge Kaplan dismissed their breach-of-sharing claim with prejudice, but let a claim on sharing of future payments go forward (SFNet; Cadwalader/HLC). Cadwalader/HLC reports that a plan of liquidation was confirmed on May 22, 2026, and that the minority lenders appealed.
The blocker it led to
Two protections would have blocked this. The first is a J.Crew-style blocker: a ban on moving material assets or IP to unrestricted subsidiaries. It needs to cover the trapdoor path through non-guarantor restricted subsidiaries, and it needs caps on investments in non-guarantor restricted subsidiaries. The second is Serta protection: subordination and non-pro-rata exchanges count as sacred rights, and open-market purchases are narrowed. Octus says the open-market route is defunct after the Fifth Circuit's Serta decision. This transaction relied on uncapped baskets and no amendment, so blockers tied to amendment votes alone would not have stopped it.
What to look for
- Whether investments in non-guarantor restricted subsidiaries are capped (Del Monte's were uncapped).
- A trapdoor clause letting non-guarantor restricted subsidiaries pass investments to unrestricted subsidiaries without limit.
- How 'open market purchase' is worded in the pro rata sharing clause, and whether non-pro-rata exchanges need every affected lender's consent.
- Whether the 'Credit Party' definition and the wholly-owned test can be dodged, for example by issuing preferred stock in an intermediate entity.
Not confirmed: The exact split of collateral value removed and the market price change of the excluded loans were not found in my sources. Sources differ on the Chapter 11 outcome. Octus reported a plan to hand the company to participating lenders through a credit bid of over $575 million. Cadwalader/HLC reports a plan of liquidation confirmed on May 22, 2026. I could not confirm a final buyer or sale. A web search snippet mentioned a November 10, 2025 settlement over a non-pro-rata backstop and an antitrust suit filed on October 28, 2025 (Cleary tracker). I did not verify either. Cadwalader/HLC does not mention the open-market-purchase mechanic. Only Octus describes it. Research was cut short because the session's web search limit was reached, so I could not check SEC filings or Del Monte press releases.
Sources: Octus - Liability Management Exercises: AMC and Del Monte · Friedman Kaplan - Post-Trial Settlement in Del Monte LME Lawsuit · Cadwalader/HLC - Del Monte Bankruptcy Court Dismisses Breach Claim Over DIP Roll-Up · SFNet - Del Monte Foods: Non-Pro Rata DIP Roll-Ups · Cleary Gottlieb - LME Litigation Review Appendix A
Altice France unrestricted-subsidiary drop-downs and 2025 safeguard restructuring2024-2025 · drop-down to unrestricted subsidiary
In early 2024, after its Q4 2023 results, Altice France said creditors would need to take part in discounted transactions to get leverage down. It then designated UltraEdge (data centres, 70% stake being sold) and Altice Media (being sold outright) as unrestricted subsidiaries. That meant the sale proceeds did not have to repay debt, and the Altice Media cash stayed out of creditors' reach.
How it worked
- Q1 2024: after the Q4 2023 results call, UltraEdge and Altice Media were designated unrestricted subsidiaries, alongside agreed sales of 70% of UltraEdge and 100% of Altice Media. As unrestricted entities they sat outside the covenant group, so their sale proceeds did not have to repay debt or be reinvested.
- Altice Media's sale closed and the cash stayed outside the restricted group, out of creditors' reach.
- 22 May 2024 (disclosed 28 May): the 50.1% stake in XpFibre, SFR's fibre network company, plus some receivables, went into an unrestricted company, taking a major asset out of the restricted group and out of the secured creditors' collateral.
- The capacity came from the investments covenant. Octus estimated at least €16bn of capacity to designate unrestricted subsidiaries, mostly from the restricted-payments builder basket. Investments could use it even when the ratio debt test was failed, while dividends, buybacks and junior debt prepayments could not.
- Altice France also moved the junior RCF down from Altice France Holding SA to Altice France SA, which favoured its relationship banks.
- January-February 2025: the 2025 senior secured notes were repaid at par ahead of the wider deal.
- 2025 deal: about 77% of term loan and senior secured note principal was refinanced into new senior secured debt at coupons 137.5-142.5bp higher, with maturities pushed from 2025-2029 to 2028-2033. Holders received cash of about 7.6% of principal (about €1.5bn), plus a 2.5% early-bird fee for those who signed by 19 March 2025. The RCFs became a new 5-year RCF at EURIBOR+3.30%.
- Equity: the existing Drahi chain kept 55% of a new intermediate parent above Altice France. Altice France SA debtholders got 31% and Altice France Holding SA debtholders got 14%.
- Implementation: conciliation opened 28 March 2025. The Paris court approved nine accelerated safeguard plans on 4 August 2025. A U.S. Chapter 15 court recognised the French case on 25 July 2025 and enforced the plans on 30 September 2025. The deal closed 1 October 2025 and the Chapter 15 cases closed 12 February 2026.
Baskets used
- Investments covenant / unrestricted subsidiary designation (an investment in an unrestricted subsidiary must fit within investment capacity)
- Restricted-payments builder basket that investments could use even when the ratio debt test was failed (Octus calls this a loophole and says it was the largest source of the roughly €16bn capacity)
- No J.Crew blocker in the pre-restructuring documents
- Asset-sale covenant does not reach the proceeds of selling an unrestricted subsidiary (no mandatory paydown)
What creditors lost
Collateral and value left the restricted group: UltraEdge (70% sold), Altice Media (sold, cash kept outside) and the 50.1% XpFibre stake. Senior notes dropped almost 20 points when the designations were announced, followed by Moody's and S&P downgrades. In the final deal, Pitchbook reported about €7.9bn of debt eliminated (€4.4bn secured, €3.5bn unsecured); the €8.6bn headline also counts the early-2025 repayments. Reported recoveries excluding equity were about 87% for secured and about 25% for unsecured, cushioned by 31% and 14% equity stakes respectively. Drahi kept 55% and control. The relationship RCF lenders were moved to the OpCo and refinanced at par. The 2025 noteholders were repaid at par before everyone else was restructured.
Outcome
There was no litigation result. Creditors organised into co-ops and negotiated a consensual deal: over 90% binding consents by 17 March 2025, more than 95% support reported later. It was put through a French accelerated safeguard (plans approved 4 August 2025), recognised under U.S. Chapter 15 (July and September 2025), and closed 1 October 2025. About €24bn of debt was restructured, and net debt fell to €15.5bn.
The blocker it led to
My sources did not confirm a specific blocker added in the 2025 documents. Octus notes the old documents had no J.Crew blocker, but says a standard J.Crew blocker (which restricts moving material IP) would likely not have stopped these drop-downs. That is because the assets moved were shares in operating businesses, not IP, and the capacity came from builder-basket investments. The fixes the market points to are caps on unrestricted subsidiary designations and investments, a builder basket that investments can use only when the ratio test is met, and a requirement to use unrestricted subsidiary sale proceeds for paydown. Pitchbook reports that XpFibre became a guarantor after the deal.
What to look for
- Whether investments, and especially investments in unrestricted subsidiaries, can draw on the RP builder basket even when the ratio debt test is failed, and how large the cumulative builder balance is (Altice's capacity was about €16bn)
- A cap on investments in, or designations of, unrestricted subsidiaries, and whether that cap covers material assets beyond IP, such as shares in operating subsidiaries or a network company like XpFibre. A narrow J.Crew blocker alone is not enough.
- Whether proceeds from selling an unrestricted subsidiary escape the asset-sale paydown and reinvestment covenant
- Freedom to move RCF or other relationship debt between holdco and opco, and to repay maturing tranches at par ahead of others (non-pro-rata treatment); also whether a debtor-friendly local process (French accelerated safeguard, cross-class cram-down) can bind holdouts
Not confirmed: Debt reduction figures differ: €8.6bn (company/Mayer Brown), about €7.9bn eliminated (Pitchbook), about €7.5bn of funded debt (Elevenflo, €23.3bn to about €15.9bn funded debt). XpFibre's position is reported inconsistently. Bloomberg Law says the stake went to an unrestricted company on 22 May 2024. Octus describes XpFibre as already outside the restricted group. Pitchbook calls the vehicle a 'lateral affiliate' revealed in a November 2024 cleansing notice, and says XpFibre is a guarantor after the deal. A search-result summary of an Octus article says the February 2025 deal included recontributing previously unrestricted assets to the restricted group. I could not open the full text to confirm which assets. One report dates an asset drop-down to March 2024. I could not confirm this separately from the UltraEdge/Altice Media designations. The value of the XpFibre stake moved and the exact €16bn capacity breakdown by basket (builder, general, permitted investments) are paywalled and not confirmed. The task asks about '2024-2025 restructuring and asset moves'. What happened was unrestricted-subsidiary designations, not a double-dip or uptier, followed by a consensual French accelerated safeguard. My web-search budget ran out before I could confirm the remaining details.
Sources: Octus - Five lessons from the Altice France saga · Octus - Exploring Altice France's liability management options · Bloomberg Law - Altice France puts stake in XpFibre out of creditors' reach · Bloomberg Law - Altice offers creditors up to 15% stake in return for haircut · Pitchbook (reposted) - Altice France cuts debt pile without spooking market · Elevenflo - Altice France Chapter 15 recognition · Mayer Brown - advises Altice on €24bn restructuring · Altice France - Filing for Accelerated Safeguard (press index)
Altice USA / Optimum Communications: the 2024 creditor co-op, and the unrestricted-subsidiary drop-downs the company used to get around it2024-2026 · co-operation agreement or creditor group
On June 13, 2024 holders of CSC Holdings debt signed a Cooperation Agreement. The company says the group claims to hold about 99% of CSC Holdings' debt, which was $21.8bn at March 31, 2026. The agreement bars any single member, or any subset of members, from doing a one-off or facility-specific financing or restructuring with CSC Holdings.
How it worked
- June 13, 2024: CSC Holdings creditors sign a Cooperation Agreement (the Co-Op Group). The company says the group claims about 99% of CSC Holdings debt and that no member or subset can do facility-specific or one-off deals with the company. The FY2025 10-K adds that it may bar members from joining company financings unless the Co-Op approves.
- April 11, 2025: Altice USA files an 8-K saying talks between CSC Holdings and an ad hoc creditor group (Akin Gump, PJT Partners) ended with no agreement and no further talks planned.
- July 2025 ('July Designation'): subsidiaries holding substantially all of the Bronx and Brooklyn operations and network assets are designated unrestricted. Cablevision Funding LLC borrows a $1.0bn receivables-facility term loan from Goldman Sachs and TPG Angelo Gordon: 8.875% fixed, 400bp OID, due January 2031, secured by Bronx/Brooklyn receivables and network assets.
- November 25, 2025 ('November Designation'): along with a Fourteenth Amendment to the CSC credit agreement, more subsidiaries are designated unrestricted. CSC Holdings takes a $2.0bn incremental TLB-7 (SOFR+450) to refinance TLB-6. Then two unrestricted borrowers, Cablevision Litchfield LLC and CSC Optimum Holdings LLC, borrow $2.0bn of 9% UnSub term loans due November 2028 (JPMorgan as agent) to refinance that TLB-7. In effect, restricted-group term debt moved onto unrestricted entities.
- January 12, 2026: the UnSub credit agreement adds $1.1bn of incremental term loans at 9%, used to repay the July 2025 receivables facility. UnSub principal reaches $3.1bn at March 31, 2026.
- March 3, 2026: Lightpath (majority-owned, financed separately) issues $1.657bn of secured fiber-network revenue notes (ABS) and repays about $1.55bn of its own notes and term loan.
- May 29 to June 1, 2026: new unrestricted holding company CSC Investments II (Unsub Topco) holds the designated unrestricted subsidiaries and the Lightpath stake. It issues about $512m of preferred units (13% cash or 15% PIK; minimum return of 1.25x to 2.50x invested capital). Of that, $300m is sold to outside investors and funds a tender for up to 120m parent shares at $2.50, against a $0.658 close; $200m goes to Drahi's Next Partner in exchange for parent shares.
- July 2026: Second A&R UnSub credit agreement adds a $250m incremental term loan for general corporate purposes.
- Oct 2026: reported near an RSA that sells the company and its assets to lenders, with Chapter 11 under consideration.
Baskets used
- Unrestricted-subsidiary designation and investment capacity in the CSC Holdings credit agreement and indentures, used twice (July and November 2025). The filings do not name the specific basket.
- Receivables or securitization financing done at an unrestricted SPV (Cablevision Funding LLC, July 2025).
- Incremental term loan capacity under the CSC credit agreement (the $2.0bn TLB-7), refinanced out to unrestricted borrowers.
- Debt incurred at unrestricted subsidiaries, which sits outside restricted-group debt covenants (UnSub term loans; Unsub Topco preferred units).
- Separately financed majority-owned Lightpath, financed through an ABS issuer.
What creditors lost
Restricted-group creditors hold about $21.8bn of CSC Holdings funded debt: about $5.0bn of loans and $16.8bn of notes at March 31, 2026, with about $6.2bn due in 2027. Pro forma for the 2025 designations, they now look to a restricted group with about $1.00bn of 2025 Adjusted EBITDA, against about $2.33bn in the unrestricted group (CSC total about $3.33bn). By my arithmetic, about 70% of EBITDA now sits outside their guarantee and collateral net, and restricted-group leverage is roughly 22x. The June 2026 presentation shows the East Operating Group at about $2.0bn of EBITDA and the restricted subsidiaries (West, Mobile, News & Advertising) at about $1.0bn. The unrestricted assets carry their own structurally senior debt: about $3.35bn of UnSub term loans (by my sum), $1.657bn of Lightpath ABS, and about $528m of Unsub Topco preferred units at September 30, 2026. Some unrestricted cash went to repurchasing parent stock rather than to creditors. The co-op held together and kept one group of lenders from priming another. It did not stop value moving to new third-party lenders.
Outcome
No court ruling found. The talks with the ad hoc group failed in April 2025, and the company then carried out the unrestricted-subsidiary financings from July 2025 to July 2026. The FY2025 10-K said that failing to secure committed refinancing by April 2026 may raise substantial doubt about going concern. At September 30, 2026, current debt was $6.37bn and 2026 franchise impairments were $5.9bn. In October 2026 the company was reported to be nearing a restructuring support agreement handing it to lenders, possibly through Chapter 11. The company estimates that a debt restructuring which deconsolidates CSC Holdings for tax purposes could create more than $4bn of federal tax liability. As of the latest filings, no RSA had been disclosed in an 8-K.
The blocker it led to
The co-op itself is the defense. It was signed in June 2024 by creditors the company says hold about 99% of CSC debt, and it bars subsets from cutting side deals. That stops the Serta/Mitel-style uptier and the one-off, non-pro-rata exchange. The Altice case shows its limit: it does not close covenant capacity the company can use without lender consent. Unrestricted-subsidiary designations and outside financing at those subsidiaries went ahead. A complete defense also needs document-level protections in the credit agreement and indentures: a J.Crew blocker covering all material assets (not only IP), caps on investments in and designations of unrestricted subsidiaries, and limits on non-guarantor debt. This source set does not show whether any such protection existed in the CSC documents.
What to look for
- Unrestricted-subsidiary capacity: total investment and designation capacity in dollars plus EBITDA-grower or ratio baskets, and whether a J.Crew-style blocker covers all material assets or operating subsidiaries rather than only IP. Altice moved about 70% of EBITDA out.
- Securitization or receivables-facility baskets, and whether receivables plus the network assets behind them can be sold to an SPV or unrestricted entity.
- Incremental and refinancing debt provisions: whether incremental loans can be refinanced by debt of unrestricted or non-guarantor entities, and how much debt unrestricted subsidiaries may take on.
- Co-op coverage: whether co-op holders exceed every relevant vote threshold (Required Lenders, majority and supermajority in each indenture), and whether the agreement covers new-money deals with third parties as well as lender subsets.
Not confirmed: I could not confirm the reported antitrust suit by Altice/Optimum against co-op members (court, defendants, status); it may exist. It is left out of the summary. My web searches were cut off by the session's search limit, so news coverage and law-firm memos could not be checked. The specific basket or definition used for the July and November 2025 designations, and whether CSC's documents had J.Crew-style blockers, is not stated in the 8-Ks I read. Lenders in the $2.0bn UnSub term loan and its add-ons are not named beyond JPMorgan as agent. Whether co-op members took part is unknown. Bond and loan price moves for CSC Holdings debt after each designation were not found in my sources. Which lenders sit on the October 2026 RSA: Wikipedia, citing Bloomberg, names Apollo, Oaktree and JPMorgan. I could not open the Bloomberg article (blocked). The roughly 70% EBITDA share, roughly 22x restricted-group leverage and roughly $3.35bn UnSub total are my own arithmetic from the filed numbers, not company-stated figures. Whether Lightpath's EBITDA is inside the 10-K's 'Unrestricted Group' $2.33bn is not clear. The June 2026 presentation leaves Lightpath out and shows East at about $2.0bn. The task named this a defensive cooperation-agreement case. What actually happened is a co-op that blocked subset deals, followed by drop-downs to unrestricted subsidiaries that went around it.
Sources: Optimum 8-K June 1, 2026 - press release EX-99.1 (Unsub Topco, Co-Op Group ~99%, $21.8bn debt, >$4bn tax) · Optimum 8-K June 1, 2026 - main document (Unsub Topco, special committee, preferred unit terms) · Optimum 8-K June 1, 2026 - investor presentation EX-99.2 (East ~$2.0bn EBITDA, $3.1bn UnSub facility) · Offer to Purchase, CSC Investments II (Cooperation Agreement dated June 13, 2024) · Tender offer press release EX-99.3 ($2.50 vs $0.658) · Altice USA 8-K April 11, 2025 (ad hoc group talks ended) · Altice USA 8-K July 17, 2025 ($1bn receivables facility, Bronx/Brooklyn collateral) · Optimum 8-K Nov 25, 2025 (TLB-7 and $2bn UnSub term loans) · Optimum 8-K Jan 12, 2026 ($1.1bn UnSub incremental) · Optimum 8-K March 2026 (Lightpath $1.657bn fiber ABS) · Optimum 8-K July 6, 2026 ($250m UnSub incremental) · Optimum FY2025 Form 10-K (Co-Op risk factor, going concern, July/November designations, restricted vs unrestricted EBITDA) · Optimum Q1 2026 10-Q (UnSub facility $3.1bn principal) · Optimum Q3 2026 10-Q (current debt $6.37bn, impairments) · Bloomberg Law: Optimum mulls possible bankruptcy (Oct 2026) · Wikipedia: Optimum Communications (RSA reports, Oct 2026)
Merlin Entertainments (Motion JVco), no asset-level financing confirmed; actual move was the sale of 29 Discovery Centres to the LEGO Group2025-2026 · other
I could not confirm the deal as described: a financing secured on selected Merlin assets such as the London Eye, carved out of the first-lien collateral. Merlin's own 2024 and 2025 annual reports and its June 2026 half-year review list no such financing. Its debt is all group-level: term loans, secured notes and an RCF at Motion Finco S.a r.l., plus 2031 secured notes issued by Merlin Entertainments Group US Holdings Inc.
How it worked
- Capital structure at 27 Dec 2025 (2025 annual report). Motion Finco S.a r.l. borrowed EUR 1,020m and $1,364m of term loans due Nov 2029, EUR 700m 7.375% secured notes due 2030, $410m 8.375% secured notes due 2032, and a GBP 428m RCF due May 2029 (GBP 160m drawn in cash). Merlin Entertainments Group US Holdings Inc. issued $500m 7.375% secured notes due 2031. Motion Bondco DAC holds the 'other senior debt': EUR 370m 4.5% and $410m 6.625% notes due 2027.
- Feb 2024 refinancing. Merlin issued $500m of 2031 secured notes, extended term loans from 2026 to 2029, repaid EUR 376m of term loans and increased the RCF. The company reported about GBP 170m of net cash proceeds.
- Feb 2025 refinancing. Motion Finco issued $410m of 2032 secured notes and used the proceeds to repay $400m of 5.75% secured notes due 2026 issued by Merlin Entertainments Limited.
- Asset sale. 29 Discovery Centres went to the LEGO Group, whose parent KIRKBI is part of Merlin's ownership group. Merlin announced the sale on 24 Sep 2025 and completed it on 27 Feb 2026 for about GBP 0.2bn in cash. The half-year review says the sale 'added just over GBP 0.2 billion of liquidity'.
- Sep 2026 commitment for a new senior secured term facility ($396m plus EUR 418m, about GBP 657m). It will refinance about GBP 630m of 2027 senior notes and other debt. Closing was expected by the end of 2026.
- The three UK resort theme parks are leased from a landlord, according to notes to the 2024 and 2025 accounts. This report does not say how or when that lease arrangement started.
Baskets used
- None confirmed from public sources. The credit agreement and indentures sit behind a password-gated bondholder page, so the baskets actually used could not be checked.
- The Discovery Centre sale would normally fall under the asset-sale covenant: fair value, a minimum share of cash consideration, and a reinvest-or-prepay deadline for net proceeds. An affiliate-transaction test may also apply, because the buyer's parent is a shareholder. Neither point is confirmed.
What creditors lost
Nothing public shows any creditor class being primed or left out. What is reported: Discovery Centre assets with GBP 105m of net book value left the group for about GBP 0.2bn in cash, which the company called liquidity. Separately, about GBP 630m of 2027 notes ('other senior debt' at Motion Bondco DAC) are due to be refinanced into senior secured term debt, which increases the secured claims that share the existing collateral. This report found no reported bond price moves or recovery effects.
Outcome
No litigation, restructuring or creditor dispute was found in Merlin's own disclosures. The Discovery Centre sale closed in February 2026. The new secured term loan was expected to close by the end of 2026. The 2025 annual report says the group met its covenants, and the RCF springing test (senior secured debt below 10:1, tested when the RCF is 40% or more drawn) was met.
The blocker it led to
No deal-specific blocker was reported, because no priming or carve-out financing was confirmed. Generally, the protections relevant to the move described (asset-level debt outside the collateral) are limits on non-guarantor and restricted-subsidiary debt, J.Crew-style limits on moving material IP or assets to unrestricted subsidiaries, and Chewy-style protection against releasing guarantees through partial share sales.
What to look for
- Asset-sale covenant: whether net proceeds must prepay secured debt or can be kept as liquidity or reinvested, and how large the reinvestment window and de minimis thresholds are.
- Non-guarantor restricted-subsidiary debt basket, plus any property or asset-level carve-out (for example permitted sale-leasebacks or project financings). This is the room to put debt directly on single-asset subsidiaries such as London Eye Holdings Limited or CWA PropCo Limited.
- Investments in unrestricted subsidiaries, and whether a J.Crew-style blocker covers material IP or key attractions.
- Affiliate-transaction covenant thresholds and fairness-opinion requirements, given sponsor-affiliated buyers such as KIRKBI and the LEGO Group.
Not confirmed: The web search budget for this run was already used up, so I could not search the financial press, law-firm memos or creditor commentary. Everything here comes from Merlin's own public filings. The deal as described (a financing secured on the London Eye or other selected assets that reduced first-lien collateral) does not appear in the 2024 or 2025 annual reports or the 2026 half-year review. It may not have happened, it may predate these filings, or it may have been reported only in the press. I could not confirm it. The 2024 and 2025 accounts show three UK resort theme parks leased from a landlord. This report does not confirm whether that came from an earlier sale-leaseback or opco/propco split, or how it affected lenders. The credit agreement and indenture terms, including basket sizes and any J.Crew, Serta or Chewy protections, could not be checked because the debtholder documents are password-gated. Whether the Discovery Centre sale proceeds were later used to prepay secured debt is not stated. The company described them only as liquidity. The 2027 notes are classed as 'other senior debt', not senior secured debt, but whether they are guaranteed or subordinated in any way was not confirmed.
Sources: Motion JVco Limited Annual Report and Accounts 2025 · Motion JVco Limited Annual Report and Accounts 2024 · Motion JVco Limited Half Year Review to June 2026 · LEGO Group completes acquisition of Discovery Centres (Merlin news release, 27 Feb 2026) · Merlin results, reports and presentations index · Merlin information for debtholders (password-gated)