Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1494420
J. Crew – J. Crew Blockers A "J. Crew" blocker is a prohibition in leveraged loans and high yield bonds that prohibits material IP from being transferred by a restricted subsidiary to an unrestricted subsidiary. 19 Different forms of "J. Crew" blockers may include prohibitions on: • Transfer of material IP by a restricted group entity to an unrestricted subsidiary using investments, restricted payment or (ideally) both; • Designation of any restricted subsidiary that owns material IP as an unrestricted subsidiary using investments, restricted payment or (ideally) both; and • The transfer of IP by way of a sale (sometimes will include exception for a legitimate business purpose); • Any unrestricted subsidiary owning or exclusively licencing any material IP. Typical deficiencies in J. Crew blocker provisions include: • Protection may be limited to transfer of assets using capacity from investment baskets only and not restricted payments baskets; • Such prohibitions may be limited only to the transfer of assets to an unrestricted subsidiary and will still permit IP- owning restricted subsidiaries to be redesignated as unrestricted subsidiaries which would have the same effect; • Material IP may be defined and limited to certain specified IP or subject to a threshold; • Inherently deficient in that it only covers IP. It is a helpful protection for a business with valuable IP, but it does little for an IP-light business with valuable real estate or equipment. Liability Management and Refinancing Solutions in Europe