hard · Debt Capital Markets credit-ratings-risk
What happens if a borrower makes an investment in a subsidiary, and that subsidiary is later re-designated as an 'Unrestricted Subsidiary'?
- The builder basket is left entirely unaffected provided the subsidiary was already a wholly owned entity
- The fair market value of the subsidiary at the time of re-designation is treated as a usage of the builder basket
- Re-designations fall under the Mergers covenant exclusively and therefore have no bearing on the RP basket
- The re-designation increases available builder basket capacity because the restricted group now carries fewer liabilities
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