medium · Debt Capital Markets
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 unaffected if the subsidiary was already wholly owned
- The fair market value of the subsidiary at the time of re-designation is treated as a usage of the builder basket
- Re-designations are governed by the Mergers covenant and do not affect the RP basket
- The re-designation increases the builder basket because the group now has fewer liabilities
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