Merlin Has the Option to Use Proceeds From Disposal of Discovery Centres to Partially Refinance 2027s; Other Available LME Options Could See 2027s Leapfrog Senior Secured Debt

• S&P recently downgraded Merlin Entertainments, pointing to the company’s unsustainable capital structure. Merlin’s biggest headache at the moment is the looming 2027 maturity of its £617 million-equivalent senior (subordinated) notes. A plain vanilla refinancing of these notes may prove difficult given their CCC- rating and therefore a liability management exercise should not come as a major surprise.

• Merlin has also agreed to sell its LEGO Discovery Centres and Legoland Discovery Centres to the LEGO Group owned by its largest shareholder KIRKBI for an estimated cash consideration of around £200 million. Sale proceeds could be used to repay the 2027s instead of being applied toward a repayment of senior secured notes.

• A few other options for a liability management exercise aimed primarily at a refinancing or maturity extension of the 2027s are:

• Option 1: Merlin could monetize its assets via additional asset sales, securitization or sale-and-leaseback arrangement and use the proceeds to repay the 2027s.
• Option 2: Merlin could uptier the 2027s to rank equally with its senior secured notes. They have enough senior secured debt capacity and restricted payment flexibility under the terms of the senior secured notes to do so.
• Option 3: A more aggressive uptiering option would be to leapfrog the 2027s to prime the senior secured notes with respect to a portion of the company’s assets, through a drop down or pari-plus transaction. Again, we expect Merlin has adequate covenant capacities to successfully execute such a transaction under their senior secured notes.

• Each of these transactions can be executed without the consent of the senior secured noteholders, leaving the 2027s holding the upper hand despite their junior position in the stressed capital structure.

The rollercoasters at global theme park operator Merlin Entertainments (Merlin) must be a bumpy ride these days (at least for its debt investors). On Aug. 20, S&P downgraded the long-term issuer credit rating on Motion Midco Ltd., a holding company of the group, to CCC+ from B-, as well as the issue ratings on its senior secured debt to B- from B, and on its senior notes to CCC- from CCC. Ominously, while the ratings agency expects the group to maintain an adequate liquidity position over the next 12 months, it views the capital structure as “unsustainable and dependent upon favorable business, financial and economic conditions”.Just weeks after Merlin scrapped plans to sell some of its Sea Life aquariums in early August, the company managed to seal another deal. On Sept. 24, the LEGO Group announced it will acquire LEGO Discovery Centres and Legoland Discovery Centres from Merlin for an estimated cash consideration of around £200 million. The transaction will include 29 centers, which attract around 5 million visitors each year. The transaction does not include Legoland Parks, which is Merlin’s biggest money spinner. Merlin’s CEO Fiona Eastwood said the deal would allow Merlin “to strengthen its focus on driving the growth and success of Legoland resorts alongside our other attractions worldwide” but Merlin is yet to indicate potential use of proceeds from the sale.

In this report, we look at whether Merlin can use the proceeds from such disposal to partially refinance the 2027s ahead of the senior secured notes, in compliance with their senior secured notes covenants. At the same time, given the £200 million of sale proceeds aren’t sufficient to refinance the 2027s in full, which as discussed below, which is likely the most pressing concern for the company at the moment, we think it is important to seriously consider some of Merlin’s other liability management options.

We will look at the types of liability management exercises, or LMEs, Merlin can undertake in light of the covenants relating to its senior secured notes only. We will also be writing a separate analysis which includes its senior facilities agreement governing the term loans and RCF, so if you are private on those and would like to see our analysis, please contact us HERE.

Octus financial analysts will also be publishing an insightful report exploring the group’s recent underperformance and provide forecasts of the group’s financial position as well as guidance on recoveries. This report will soon be available on the Merlin Entertainments’ page on Octus.

First, let’s take a look at Merlin’s sizable capital structure.Its senior secured debt consists of:

(i) £428 million of commitments under its revolving credit facility due May 2029, of which £126 million was drawn as of June 30, 2025 (“RCF”);
(ii) €1.02 billion and $1.27 billion Term Loan B tranches maturing in November 2029 (“Term Loan B”);
(iii) €700 million senior secured notes due 2030 (“2030 SSNs”);
(iv) $500 million senior secured notes due 2031 (“2031 SSNs”); and
(v) $410 million senior secured notes due 2032 (“2032 SSNs” and, together with the 2030 SSNs and 2031 SSNs, the “SSNs”).

In addition, Merlin’s junior debt consists of $410 million and €370 million of senior notes due November 2027 (“2027s”).Each of the senior secured instruments benefit from springing maturity if the 2027s remain outstanding on Aug. 15, 2027, and in the case of the RCF only, July 15, 2027.

Merlin also has £1.656 billion of lease liabilities as of June 30, 2025. Interestingly, it is permitted to exclude all leases (including pre-IFRS 16 finance leases) from the debt component of its covenant calculations, while EBITDA is calculated on a pre-IFRS 16 basis. The full capital structure is below.

If you think the senior secured debt should be sitting pretty given their position in the capital structure, the inverted trading pricing might seem puzzling with the senior secured instruments trading well below the 2027s as indicated in the graph below. The reasons for that might be more apparent once you have finished reading this piece.

The looming maturities of the 2027s is perhaps the biggest concern for the company at the moment. They effectively have under 12 months to get a refinancing or maturity extension done before the springing maturity in the senior secured debt results in them become current and cause all sorts of problems. The CCC- rating of this debt makes a vanilla refinancing very difficult, and if it can be pulled off, very expensive. Therefore, any near-term LME is likely to be aimed at dealing with the 2027 maturities in the cheapest way possible. An extra boost of liquidity and / or reduction in interest burden would be a big plus.

Before we get into the meat of the matter, it is worth noting a couple of points on the capacity calculations that underlie the analysis.On the one hand, covenants in the 2030 SSNs, 2031 SSNs and 2032 SSNs are largely the same, which makes the analysis a bit simpler. On the other hand, subtle differences between the tranches make the covenant calculations more complex. For example, senior secured debt capacity may be different under each instrument due to the way existing debt outstanding on the relevant issue date of the bonds was grandfathered. In addition, the SSNs have super-grower baskets, under which the fixed amount of every EBITDA soft-capped basket is automatically increased to the highest amount achieved during the life of the SSNs under the EBITDA soft cap and does not decrease if (or in Merlin’s case when) EBITDA subsequently declines. Again, this could potentially lead to different capacities across tranches, but it appears that in all cases the day-1 fixed amount of the basket (which is common across the SSN instruments) is currently the high watermark therefore leading to consistent capacities – one of the few good outcomes of a secular decline in EBITDA since initial issuance. A summary of our covenant capacity calculations under Merlin’s SSNs and principal assumptions relating to them are set out in Appendix A, which also includes a more detailed sample calculation for the 2030 SSNs. Capacities used in the analysis paragraphs below are based on the most restrictive capacity across instruments.

One word of caution – these are our best estimates based on available information and the assumptions set out in Appendix A. However, as is not atypical, Merlin’s covenant calculations benefit from a number of flexibilities and optionalities under the documentation, which could have an impact on actual capacity as calculated by the company.

In light of the announced disposal of the LEGO Discovery Centres and Legoland Discovery Centres, it appears that the path currently being pursued by the company is to raise proceeds through asset sales. We discuss the asset sale requirements below and in a similar vein analyze options for sale-leasebacks or securitizations, although we do note that consideration will also need to be given to the viability of any such strategy and whether it would bring meaningful deleveraging rather than merely kicking the can down the road.

As for asset sales, including the announced disposal, these would need to meet the customary requirements of:

(1) being sold for fair market value;
(2) with at least 75% of the consideration being in the form of cash and cash equivalents (subject to certain exceptions and baskets); and
(3) the net proceeds being applied towards one of the permitted applications.

Assuming the first two of these conditions are easy to meet, the focus falls on the permitted use of proceeds and, in particular, whether such proceeds could be used to repay the 2027s ahead of the SSNs.Although repayment of the 2027s is not directly listed as a permitted use under the asset sale proceeds menu, any proceeds from asset sales used to fund a restricted payment or permitted investment that is permitted under the restricted payments covenant are carved out from the asset sale proceeds application requirement and therefore permitted. That is a long way of saying that we need to look at the restricted payments covenant to determine the capacity to repay the 2027s. As we discuss in detail under Option 2 below, Merlin has sufficient restricted payment flexibility to do so either utilizing the loophole which grants Merlin the carte-blanche ability to repay the 2027s without using restricted payment basket capacity or alternatively using its £632 million of restricted payments capacity for this purpose. Yes, Option 2 was actually our Option 1 before the disposal announcement came along! In summary, the disposal proceeds from LEGO Discovery Centres and Legoland Discovery Centres could be used to partially refinance the 2027s ahead of the SSNs.

There are probably other ways to engineer a similar outcome. For example, it could draw down the £428 million RCF and repay a portion of the 2027s, then use asset sale proceeds to repay the RCF and still have the full amount of the RCF available for future drawings (including to repay any remaining 2027s) – the asset sale covenant doesn’t require revolving commitments under the RCF to be canceled to the extent amounts drawn are repaid with asset sale proceeds.

In fact, the company could completely bypass the asset sale covenant by transferring the disposed assets to an unrestricted subsidiary prior to the sale using the investment capacities mentioned in Option 2, a strategy deployed by Altice France in the initial stages of its restructuring negotiations. This would mean any eventual sale proceeds are not subject to the asset sales covenant and could be used to refinance the 2027s.

The SSNs also permit uncapped asset securitizations over accounts receivables, royalty or other revenue stream and other rights to payment so long as they meet certain conditions so as to constitute a “Qualified Securitization Facility”, principally that the obligations are nonrecourse to the restricted group (other than the securitization subsidiary engaged in such financing), management has determined that the securitization is in the aggregate economically fair and reasonable to the company and the sale / contributions of securitization assets is made at fair market value.

The bigger question here is what securitization assets Merlin has that it could leverage for these purposes. Although a receivables-backed facility could provide some liquidity, Merlin’s accounts receivables don’t seem to be sizable enough. That probably leaves royalty from intellectual property, but there again the LEGO and Legoland trademarks that are key to Merlin’s business are owned by KIRKBI and licensed to Merlin for exclusive use subject to certain conditions (and are therefore a revenue stream for KIRKBI rather than Merlin). Still there are other trademarks that the company identifies as its “Key Brands” that might be ripe for an IP securitization, including brands such as Madame Tussauds and Sea Life. As opposed to a drop down to an unrestricted subsidiary, this would not use up any investments capacity, and so long as it is structured to meet the definition of the “Qualified Securitization Facility” it would not require any debt capacity either – quite an intimidating prospect for a business with a fair amount of brand value.

Financing raised through sale and leasebacks is also a possibility, although it is questionable whether this is a viable strategy as it would result in further cash burn unless accompanied by meaningful deleveraging. Rather generously, sale and leasebacks (or for that matter any leases whatsoever) do not constitute indebtedness for the purposes of the debt covenant under the SSNs and are therefore permitted on an uncapped basis. That’s one part of the analysis made easy, but such transactions would also need to run through the hoops of the asset sale covenant. Even on this front there is an exception for any such financing transaction with respect to property built or acquired after November 2019 (the acquisition completion date by the current shareholders). As a result, to the extent that the property was built or acquired after such date, it could be a potential candidate for a sale and leaseback that is completely unregulated by the debt and asset sale covenants. Even to the extent it relates to a pre-existing property, such sale and leaseback will be treated the same as any other asset sale and permitted so long as the asset fair market value, cash consideration and application of proceeds requirements are met (as described above, these are not a particularly high bar for Merlin to achieve).

The question therefore comes back to what assets are owned by Merlin and free to be encumbered in this way. Here is a helpful list of properties in Merlin’s most recent offering memorandum relating to the 2032 SSNs that indicates that several of its sites are already subject to sale-and-leaseback arrangements or other lease / license arrangements, although there still appear to be valuable remaining freehold properties (e.g., several Legoland Parks and Peppa Pig theme locations, Gardaland Resort, Chessington World of Adventures Resort and Merlin Magic Making Studios).

With a like-for-like refinancing of the 2027s looking difficult, another option the company could explore is the ability to refinance or exchange the junior 2027s with senior secured debt resulting in an uptiering of the 2027s so they rank equally with the senior secured notes. While some may see the repayment of 2027s using asset sale proceeds as a less controversial option, to us it is actually more aggressive than an uptier as it effectively means the 2027s are being given priority over the asset sale proceeds (rather than a parity position with the senior secured notes).Remember that the 2027s are contractually subordinated to the SSNs – more specifically the guarantees provided by the common guarantors within the Merlin group for the 2027s are contractually subordinated to their corresponding guarantees / obligations with respect to SSNs.This uptiering would therefore require senior secured debt basket capacity, as the refinancing debt basket typically used for a refinancing would not allow contractually subordinated debt to be refinanced with senior debt. In addition, this will also require compliance with the restricted payment covenant as the early prepayment of contractually subordinated debt (more than one year before maturity) is a restricted payment.

The good news for Merlin is that it has a fair amount of capacity to incur additional senior secured debt. As mentioned above, senior secured debt capacity is likely to differ between the SSN tranches – however we estimate the most restrictive bond instrument in this regard is the 2030 SSNs, which allows for £2.2 billion of general purpose debt secured on the collateral on a pari passu basis leaving plenty of room to refinance the £617 million-equivalent 2027s.Much of this capacity is derived from baskets that if used for debt incurrence would deplete restricted payments capacity (example under the dividend-to-debt toggle basket which allows the company to incur secured debt in an amount that is double any unused restricted payments capacity under specified baskets or under the contribution debt basket based on equity contributions that would otherwise build restricted payments capacity). As we discuss below, Merlin likely does not need the restricted payments basket capacity, but even if they do, it appears they still have over £800 million of senior secured debt capacity under its credit facilities and general debt baskets that would leave restricted payments capacity unaffected.

The even better news for Merlin is that with respect to restricted payments capacity, it probably does not need any basket capacity. This is because of a glaring loophole in the restricted payments covenant that is present in each of the SSNs (see clause 15(i)). This provision allows Motion Acquisition Limited, which is the parent guarantor of the senior secured debt (and the holding company of the senior secured debt restricted group for covenant purposes), to pay dividends to a direct or indirect parent company (such as Motion Midco Limited and / or its subsidiary, Motion Bondco DAC, the issuer of the 2027s) in amounts required by such parent company to in turn pay amounts in respect of its own debt. The only condition is that such parent company debt must have been guaranteed by the parent guarantor or any of its restricted subsidiaries. Crucially, there is no exception for debt guaranteed on a subordinated basis which would have made the provision more palatable and unavailable for a debt-push down of the nature we are contemplating.

Since the 2027s are guaranteed by the parent guarantor and several of its subsidiaries, albeit on a subordinated basis to their obligations with respect to the senior secured debt, this uncapped exception to the restricted payments covenant will apply. As a result, proceeds of any senior secured debt (using available senior secured debt capacity mentioned above) may be upstreamed to repay the 2027s.

A structure chart from Merlin’s most recent offering memorandum relating to the 2032 SSNs may help with visualising the above.

The use of this loophole may be controversial in as much as it could take investors by surprise. However, it appears Merlin may have just about enough restricted payment capacity (estimated at £632 million if the duplicative debt baskets are not used limiting senior secured debt capacity to around £800 million) to achieve the same outcome even without taking advantage of the loophole. That said, Merlin may want to preserve this capacity for use on a future rainy day.Such an uptiering into senior secured debt is obviously positive for the 2027s and would be a good bargaining chip to extract concessions from them such as a maturity extension – although the 2027s may want to keep their temporal seniority to have an upper hand in any future restructuring negotiation. Unfortunately for the SSNs, who will stand to be diluted with more debt piling on to share their collateral on an equal basis, they will have no say in this due to the flexibility afforded by their covenants.

However, any new money senior secured debt to refinance the 2027s in this way may be very expensive and, in the case of a consensual exchange, the 2027s may need further incentives given their current trading prices.

The option above, i.e., an uptiering of the 2027s, would see the 2027s elevated into senior secured debt meaning that they should have similar recoveries to the SSNs in an insolvency or hard restructuring. An even more aggressive route would be to refinance or exchange the 2027s with new priority debt that primes the SSNs (and therefore could have greater recoveries). The ability to offer the 2027s an effective double promotion in the capital structure leapfrogging over the SSNs in priority could lead to better refinancing terms for the company. There are several ways for Merlin to structure such a priming transaction – some easier than others – as we explore below.

A priming transaction can be achieved via a J. Crew-style drop-down transaction, in which restricted payment and investment capacity is used to move material intellectual property or other material assets into an unrestricted subsidiary. Any guarantees or security granted in favor of the senior secured notes over assets that are so transferred will be released. Unrestricted subsidiaries are not subject to the negative covenants and therefore can raise uncapped amounts of debt, which will be structurally and effectively senior to the SSNs, with respect to the assets transferred to it. Problematically for investors, the SSNs do not contain a J. Crew blocker preventing the transfer of material intellectual property or other assets to an unrestricted subsidiary, so a drop-down is in theory possible without any hindrance.We estimate that Merlin has at least £1.4 billion of capacity to move assets into an unrestricted subsidiary (summing up its investment capacity under all its general purpose restricted payments and permitted investment baskets). However, that is the fair market value of assets that can be moved into an unrestricted subsidiary for a drop-down transaction rather than the total amount of debt that can be incurred. How much lenders would ultimately be willing to lend against those assets will depend on a number of factors, including the assets involved, but it will almost certainly be less. That said, even assuming only a 50% LTV ratio, it should provide over £700 million of debt capacity, enough to refinance the full amount of the 2027s.

Another priming option (at least in theory) would be to do a drop-down style priming transaction within the restricted group, by raising debt at the level of a non-guarantor restricted subsidiary and then securing that debt on the assets of the non-guarantor. As with a drop-down, the new debt will be structurally and effectively senior to the SSNs with respect to the assets of the non-guarantor subsidiary, but instead of using restricted payment capacity, it uses debt and lien capacity.There is no separate cap on the amount of debt that can be incurred by non-guarantors under its various debt baskets, which is a minority position in the market. As a result, we estimate it has at least £2.4 billion of capacity to incur debt at the level of non-guarantor restricted subsidiaries. All of that debt can be secured on assets of non-guarantor restricted subsidiaries under a customary permitted lien exception. The question then turns to whether there are valuable assets to support such priming debt at non-guarantor subsidiaries and, if not, can assets be transferred to them.

During the 52 weeks ended Sept. 28, 2024, the guarantors accounted for 77% of the consolidated revenue and 78% of the consolidated EBITDA of the group, and as of Sept. 28, 2024, the Issuer and the Guarantors accounted for 69% of the consolidated assets (excluding brand values, goodwill, minority equity investments and investments in wholly owned subsidiaries) of the Group. Although there is some value at non-guarantors, it might take more to get a deal over the line.

The easiest way to do this would be the so-called Chewy option where existing guarantors are released from their guarantees following the sale of a minority equity interest in such an entity (even if only a nominal amount) is transferred. Although there is no explicit release provision under the SSNs that allows the release of guarantors simply as a result of a minority sale, in the absence of a Chewy blocker there are potentially other ways in which this can be engineered – for example by simultaneously releasing guarantees under the other SSNs and the Senior Facilities Agreement, leaving bondholders at the mercy of whether such release is permitted under the Senior Facilities Agreement.

Even if the above Chewy option is not available, there is scope to transfer value from guarantors to non-guarantors, at least with respect to assets that are not pledged in favor of the senior secured notes. In this regard, as is typical for high-yield incurrence covenants, there is no restriction on guarantors transferring assets to non-guarantor restricted subsidiaries so long as they do not constitute substantially all assets of such guarantor in which case compliance with the merger covenant is required. Then again, while the merger covenant in Merlin’s SSNs restricts the sale of substantially all assets of a guarantor, a circular exemption from its scope for transactions not prohibited by the asset sale covenant could provide a potential path to do so. In case you are wondering where this circularity arises from – the definition of “Asset Sales” carves out disposal to any restricted subsidiary meaning such transfers are not subject to the asset sales covenant in the first place.

In the structurally senior financing scenario, Merlin will still have to contend with the annual guarantor coverage test in the Senior Facilities Agreement. They may also need to deal with the complexity involved with asset transfers and relatively aggressive reads of the documentation. None of that is involved in providing direct pledges over unencumbered assets of the group, even if they are held by guarantor subsidiaries. Several of the debt baskets in Merlin’s SSNs, including the credit facilities basket, general debt basket, contribution debt basket and dividend-to-debt-toggle basket, can be secured on noncollateral assets leaving plenty of capacity to do so. To make matters worse, outside the U.S., collateral is limited to shares, bank accounts and intercompany receivables, leaving all other assets unencumbered and free to be pledged.

A variation on a drop-down would be to structure a “pari plus” financing, where new debt is incurred on a pari passu secured basis with the SSNs, but given an additional boost through a drop-down with the assets transferred to unrestricted subsidiaries exclusively securing the new debt. As noted above, the group can incur in excess of £800 million of additional senior secured debt without depleting its £1.4 billion of capacity to move assets into an unrestricted subsidiary for the added boost to the collateral. This boost could increase the risk appetite of creditors willing to lend to Merlin (whether via new money or an exchange of the 2027s) and therefore improve the terms they are willing to offer, enhance the amount they are willing to lend and/or reduce the interest rate that they require. A similar structure could be engineered to make use of the structurally senior debt capacity (instead of senior secured debt capacity) described above.Importantly, the SSNs do not have adequate protections against a pari plus financing. While the definition of “Unrestricted Subsidiary” prohibits an unrestricted subsidiary from holding shares in the parent guarantor or any restricted subsidiary or owning any of their debt or any lien on their assets, there is no prohibition on an unrestricted subsidiary providing credit support in the form of guarantees or security to debt incurred by the restricted group. So while the unrestricted subsidiary may not be able to provide an intercompany loan to the restricted group, there does not appear to be a restriction on it being the beneficiary of an intercompany loan from the restricted group or providing a direct guarantee for any debt / obligations incurred by the restricted group.

In any of these options, the trick will be finding which assets are best placed to support such a priming transaction. It is anyone’s guess as to which assets are ripe for such a transaction, but the company should have plenty of options. They could do this thematically – e.g., drop down attractions such as Sea Life (or perhaps more jarringly some Legoland Parks) or even geographically. One advantage of the drop down to unrestricted subsidiaries is that any security interests over assets dropped down in favor of the senior secured notes will automatically be released meaning that the company’s options will not be limited to assets that are free from such a pledge (e.g., the U.S. assets are subject to an all asset pledge).

There is currently no super senior debt in the capital structure. The SSNs however permit debt incurred under certain specified components of the credit facilities basket (including the free and clear basket) to be secured on a super senior basis up to an amount of £601 million once the TLB is repaid or refinanced (or at least all lenders have been offered to be prepaid). On that basis, super senior debt might be a possible route to refinance some of the existing debt, provided the TLB is taken out, but until the TLB is refinanced it will not be available. Also, the RCF will eat into this super senior basket capacity to the extent it remains outstanding and is designated super senior.Offering super senior status over the entire collateral package is obviously advantageous as it primes the SSNs over all of the collateral (including the single point of enforcement share pledge), rather than only over a portion of the assets as will be the case in a dropdown. It also gets rid of the operational complexities that could be involved in a transfer of assets to unrestricted subsidiaries or non-guarantor subsidiaries (e.g., moving employees and contracts). However, we are not giving it serious consideration in this case due to the TLB refinancing requirement and the relatively small cap, which would require majority consent under the SSNs to amend. Instead, we think the drop down and pari plus priming techniques will likely be favored here as they enable the company to bypass the senior secured creditors completely.

The shareholding structure of Merlin looms large over the range of potential outcomes and could have a big impact on how the situation plays out. According to the offering memorandum, sponsor Blackstone indirectly owns about 31.99% , CPP Investments indirectly owns around 15.5% and KIRKBI indirectly holds 47.49% of the entity that controls the group. KIKRBI is the holding company of the LEGO Group and other companies owned by the Kirk Kristiansen family. In addition, approximately 5% is indirectly held by The Wellcome Trust.

Some market participants have pointed to the presence of KIRKBI as a positive factor – hoping that the family’s large assets outside the Merlin group, and a reputation to maintain, means that they may not support an aggressive LME. On the other hand, the more pessimistic folk draw little comfort from this and have pointed to some of Europe’s largest LMEs such as Altice France and Ardagh involving individual controlling owners, although a distinction can probably be drawn from the situation at hand as those cases involved the key assets owned by Drahi and Coulson, respectively.

From KIRKBI’s perspective, an important motivation could be making sure Merlin’s LEGO-related businesses are not adversely impacted and that it maintains adequate control over any licensee of the LEGO brand. Perhaps the sale of Legal Discovery to KIRKBI is a first signal of what’s to come?

The disposal of the LEGO / Legoland Discovery Centres to the LEGO Group is an indication that the company is preferring the asset sale route for the time being. The use of proceeds from the sale is not clear, but it could be used to partially refinance the 2027s if the company so chooses. Merlin also appears to have several options at its disposal to pull an aggressive LME out of its hat if it needs to in order to fully refinance or extend maturities of the 2027s giving them some breathing room to turn the business around. This likely explains why the 2027s are sitting pretty in terms of their trading price (relative to their junior position in the capital structure). None of these options are particularly good for the SSNs, which explains why they are trading below the 2027s despite being senior in the capital structure. This could turn out to be another example in Europe where documentation flexibility combined with temporal seniority could lead to unexpected outcomes.

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