Where Did My Collateral Go? It’s Not Just Financial Covenants That Matter — A Variation on the Theme of Unintended Consequences as J. Crew Moves Key Collateral Beyond Lender's Reach

July 15, 2017

Confronted with a challenging retail environment and resulting negative consequences to its business, as part of its efforts to restructure its debt and engage in "value maximizing strategies", J. Crew took its valuable trademarks that were part of the collateral for its term loan and asset-based facilities and moved them to an unrestricted subsidiary outside the scope of such facilities to enable it to use them as collateral for new debt to refinance structurally subordinated PIK toggle notes at its parent company level.

David Morse, chair of Otterbourg's finance practice, provides a detailed analysis of the covenant structures in the J. Crew loan documents that led to this circumstances for the term loan and asset-based lenders, in this article appearing in the July 2017 edition of TSL Express, that can be read here.