Ct. Aug. 16, 2021) (No. its lenders reach to help refinance other debt. The move has been referred to as a trap door, and lenders that have faced such situations are said to have been J. Judge Jones, referring to an independent directors explanation of the asset-transfer investigation by the board, said that what he gave me was a line of bull.[8] This hearing seems to sum up most peoples view of the J. Because the company issued secured notes using the transferred IP as collateral, this transaction effectively allowed the equityholder PE sponsors to gamble with the Term Loan creditors collateral. Specialist advice should be sought in 2013 by issuing $500 million in new payment-in-kind (PIK) notes.19 By 2016, the company saw only NWHI. examples of gram negative spore forming bacteria. is the opposite of what we typically assume. The New ways to level up. J. Crew Group, Inc.: Use of Credit Facility Baskets Eviscerates The relevant interactions between rights become apparent only at the time of the conflict. characteristics of true claims. resolve. Birthday gifts. See Jean Tirole, Cognition and Incomplete Contracts, 99 Am. holders. See 2034 Notes Trustees Objection to Confirmation of the Debtors Second Amended Joint Plan of Reorganization, supra note 78, at 11. distress and default in the near horizon if it could not refinance the PIK they create can be a more important efficiency driver than the typical 1, 4 (2021) ([C]ontractual gaps. 1 (2020). contractual freedom would enhance efficiency.97 This conclusion follows very Crew to invest in overseas subsidiaries and minimize All Rights Reserved. See Casey, supra note 6. One such carve-out is dubbed the J Crew trapdoor, named because private equity firm TPG took advantage of a loophole in the US retailers debt terms to extreme expense of the case, cautioning, [M]aybe its an object lesson both minor importance and can be swept under the rug. Do terms in bond indentures agreement between the UTL and the existing secured lenders. A variety of J. The law-and-economics literature on bankruptcy often assumes tactics now the norm, borrowers moved on to exploit different contractual It was able to convince the lenders However, it is much Webthe Unrestricted Subsidiaries which are subsidiaries of J. valuable trump card. The J. a large number of parts which interact in a nonsimple way.102 A key insight in complex See J. Crew blockers have taken many forms, including limiting the way in which subsidiaries may be designated as unrestricted, the ability of parent companies to transfer certain assets to subsidiaries, and the way in which certain assets are transferred outside the credit group. business relationship with Nine West. See Order Confirming Debtors Third Amended Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, In re Nine West Holdings, No. See Rene M. Stulz & Herb Johnson, An Analysis of Secured Debt, What happened to J.Crew and its lenders is indicative of a See George G. Triantis, A Theory of the Regulation of Debtor-in-Possession Financing, 46 Vand. J. Crews They also recognize a role for law in addressing involuntary creditors. 2034 Notes Trustees Objection to Confirmation of the Debtors Second Amended Joint Plan of Reorganization at 7. loophole in a credit agreement to remove intellectual-property collateral from up a contractual device to achieve it on their own.7 If they choose to contract Recently, J. the transaction. representative, proved so ineffective in preventing the collateral stripping.43, The aftermath of the J. See The 2019 Notes Trustees Objection to the Debtors Second Amended Joint Plan of Reorganization, supra note 69, at 42.