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Liability Management: Identifying Permissible Double-Dip Financing Opportunities in Current Debt Agreements

So-called double dip-financings – in which new-money creditors seek to maximize their recovery by establishing multiple independent claims against a borrower’s organizational and capital structure – have emerged as the latest trend in liability management. As previously reported by Reorg, recent examples of double-dip financings include the new 11.5% secured notes due 2028 issued by a nonguarantor restricted subsidiary of the home furniture retailer At Home Group and the new term loan incurred by an unrestricted subsidiary of the travel software and technology company Sabre Corp. In this report we discuss (1) what a double-dip transaction is, (2) how recent double-dip transactions have been structured, including those done by At Home and Sabre, and (3) things to look for when determining whether a double dip is permitted under a company’s existing debt documents.   What Is a Double-Dip Transaction? A double-dip transaction is a type of financing whereby a new-money creditor seeks to maximize its recovery in a hypothetical restructuring by establishing multiple independent allowed claims against the borrower’s organizational structure and credit support, typically through multiple guarantees or claims against the same entities. While the specifics of any given double-dip financing may vary, the recent transactions by At Home[...]