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Working in restructuring in 2026:
âCanva,
Create the org chart for Hertz:
- Increase a box to illustrate the restricted group
- Add a second box for the guarantor group
- Add a box for the Oro entity, which is now a JV
- Oh, add a middle finger for legacy 2L that got bought back at a 60% discount
Make no mistakes; youâre not an intern at a bottom-tier EB like Jefferiesâ
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"The liquidity bottleneck creates significant long-term pressures for LPs as they manage portfolio construction, pacing, and commitment levels.
With distributions still well below historical norms, LPs face complex decisions balancing immediate liquidity needs against continued exposure to potentially high-performing assets. Broker surveys show that 31% of LPs cite lack of distributions as the chief constraint on deployment."
What are you hearing from the market? What is impacting your fund the most?
Find full report below.
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Going a level deeper and quoting our legal analyst
"At this stage, itâs worth getting granular about what a âSubsidiaryâ actually means. For the purposes of credit documents and, by extension, LMEs, this is principally a contractual question: the documents themselves define which entities are classified as a Subsidiary.
In Xerox, the legalese largely boils down to identifying whether Xerox owns or controls more than 50% of the votes that can be used to choose the people who manage the entity. This would typically be ordinary shares in a company. If Company X controls more than 50% of the votes attached to equity interests entitled to elect Company Yâs directors, managers or trustees, Y falls within the Subsidiary definition and is a subsidiary of X. But if X owns 50% or less, Y may sit outside it. This creates a potential fourth recipient of dropdown assets: a âNon-Subsidiaryâ (Non-sub), neither an NGRS nor an Unsub and therefore outside restrictions drafted solely by reference to those categories."
In Hertz, the same logic applies, see definition below.
Hertz, the next non-sub (JV) dropdown?
- Hertz has Oro Mobility in its own subsidiary
- Oro Mobility is Hertzâs side business that runs vehicle fleets for ride-hailing and robotaxi companies like Uber, a great asset
- Certares and Knighthead purchase 50% of voting units and 16% of common equity of that entity, the entity is therefore a JV (see next tweet)
- Hertz also agrees to retire $51mm of 2L due 2029 from Certares and Knighthead at 60% discount (which likely bought this debt before at even greater discount)
- Debt is retired at a discount, a JV is ready with unencumbered assets, Certares and Knighthead make a gain on the flip, everyone wins, right? Sorry to whoever sold their 2L to Certares and Knighthead ha!
The next step?
- Class, you now have a nice entity with unencumbered assets, a ParentCo which needs to extend its maturities. What do you suggest doing?
- Raise debt against those assets, a beautiful non-subsidiary dropdown. Maybe, yes!
Read our primer on Non-Subsidiary Dropdowns to learn more, awesome work from our legal analyst!
NON-SUBSIDIARY DROPDOWN PRIMER | PUBLISHED
This week, we are passing the pen from our financial analyst to our legal analyst to put the Xerox transaction structure under the microscope to understand how the Non-Subsidiary Joint Venture works, and where it sits alongside other landmark dropdown transactions.
We do this by looking at the history of both asset dropdowns and non-subsidiary LMEs (yes, Xerox was not the first, actually!), before running through a simple hypothetical transaction to demonstrate how the Xerox-style non-subsidiary dropdown works step-by-step and its use case: to get around popular asset dropdown blockers.
From there, this write-up takes an analytical and critical turn.
We think there are some features of the non-subsidiary dropdown that everyone is missing.
So we want to bring them to your attention and contribute to the wider discussion around these transactions. Our first claim is that it is too narrow to equate non-subsidiaries with minority-owned joint venture corporations. If we start from first principles, we can see that a joint venture corporation is a means to accomplish a non-subsidiary dropdown, but it is conceivable that there are other ways to achieve this.
Next, we claim that it is worthwhile to explore other options, as joint venture corporations do come with significant legal disadvantages for the borrower. In light of these disadvantages, we propose two alternative non-subsidiary structures, using US and UK law, that a borrower can use to avoid giving the incumbent lender majority voting power / an equity position in the entity with the valuable assets.
We then conclude with some thoughts on recent market developments and how to think about Xerox Blockers given what weâve learned today.
We are incredibly excited to bring this analysis to you! Read below
POV: A Gen Z learns what it takes to earn multiples of the average household income in your early 20s in your first job after college
I hear a lot of pushback from SMBs saying they donât need AI because their industry has high moats.
To me, thatâs like saying we wonât make a website or use the internet because we have a high moat.
Sure, that moat might give you some runway, but it wonât adapt; youâll eventually fall behind.
And once youâre behind, youâll never recover as the gap is only getting larger.
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In September 2021, Clearlake Capital acquired Springs Window Fashions for approximately $3.4bn or almost 11x EBITDA
The deal was done in the middle of a zero-interest-rate environment and strong discretionary consumer spending, when many people had the time and cash to spend during COVID.
In this case specifically, people were stuck at home during lockdowns, which encouraged many to update and renew major home design components, a dynamic called ânesting purchasesâ.
However, inflation and rapid rate hikes pushed up costs while freezing the housing market, so existing home sales and remodeling activity dried up and consumers pulled back on big-ticket home spending. Revenue declined through 2024, margins compressed, and the business started burning cash. By late 2024, SWF had run through most of its liquidity and needed a transaction to keep operating.
The company completed an LME in 2024 that addressed liquidity and extended maturities; however, ongoing housing market pressures prolonged distress, and we expect a second transaction within the next 12 months.
On Friday, we will dive into the company history, business overview, break down the first LME, and understand where we are today, subscribe now to get in your inbox on Friday
