medium · Corporate Credit Analysis covenants
Luna Tech is a subsidiary that was recently designated as an 'Unrestricted Subsidiary' by its parent company.
What is the primary implication for creditors of the parent company?
- Luna Tech becomes legally prohibited from ever issuing any of its own third-party debt.
- Luna Tech's assets are no longer within the covenant perimeter and do not guarantee the parent's debt.
- Creditors now gain a direct first-priority lien over all of Luna Tech's intellectual property.
- Luna Tech's standalone EBITDA is now consolidated into the parent's figures for all covenant compliance testing.
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