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Explore how Non-Loan Party Restricted Subsidiaries are reshaping the risk landscape for lenders. This article reveals how their EBITDA is often included in loan covenant calculations— despite not backing the debt—creating hidden vulnerabilities. Using real-world scenarios and the recent At Home transaction, it exposes the subtle, but serious, threats these subsidiaries pose, and why lenders must rethink their protections in today’s evolving market.
Liability management transactions (“LMTs”), at their core, are maneuvers whereby a favored (or “winning”) group of lenders to a given borrower extract value from an unfavored (or “losing”) group of lenders to the same borrower. LMTs have recently gained significant momentum and—from the perspective of unfavored lenders—notoriety. Although structures continue to evolve, LMTs generally fall into three primary buckets.
ADVERTISEMENT Don't want ads? Subscribe or login now. By David Ebroon and Jared Zajac (April 16, 2024, 7:06 PM EDT) -- A sophisticated company negotiating loan terms with its lender typically apportions obligations and restrictions among various categories in such company's corporate family — most commonly referred to as loan parties, non-loan party restricted subsidiaries and unrestricted subsidiaries....
By David Ebroon and Jared Zajac (April 16, 2024, 7:06 PM EDT) -- A sophisticated company negotiating loan terms with its lender typically apportions obligations and restrictions among various categories in such company's corporate family — most commonly referred to as loan parties, non-loan party restricted subsidiaries and unrestricted subsidiaries.... Law360 is on it, so you are, too.
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