hard · Corporate Credit Analysis distressed
Under the 'J.Crew' maneuver or similar 'drop-down' liability management exercises, what is the primary mechanism by which existing creditors are disadvantaged?
- Increasing the interest rate on new debt tranches beyond MFN protection levels.
- The mandatory conversion of senior debt into junior equity upon a covenant breach.
- Transfer of valuable assets to an unrestricted subsidiary to back new senior debt.
- Direct contractual subordination of existing first-lien claims via a majority vote.
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