• The designation of a subsidiary as an unlimited subsidiary is reversible and the company can be re-injected into Restricted Group. This frees up all the limited payment capabilities used to designate the corresponding unrestricted subsidiary. However, the main restriction is that Restricted Group must be able to repay the debts of the unlimited subsidiary as part of Restricted Group`s debt alliance. Given one of the reasons for the appointment of an unlimited subsidiary, it is quite possible to obtain debts, it is quite possible that the quantum of the angry debt is too large to bring the unlimited subsidiary back into the Restricted Group, or that there is a significant debt collection capacity. To determine whether an entity is able to transfer a valuable asset to an unlimited subsidiary, the investor must review both the federal state that limits “limited payments” and the definition of an “authorized investment.” A specific basket for investments in unlimited subsidiaries is not exclusive, the company could use a general investment basket, a general basket with a limited payment and all the “Builder” baskets available. If the investment in an unlimited subsidiary is that of a non-solvency asset of the company, the issue becomes a value issue. The company must determine the valuation of the asset in order to take into account the investment in its federal exceptions. The investment contract in a financing agreement generally stipulates that the amount of the investment is the fair value of the investment determined by the company`s board of directors at the time of the investment. This can be a contentious point – investors and the company can have two totally different fair value surveys.

    the agreements in the funding document apply to all members of the small group. There are differences in what a Guarantor Restricted Subsidiary can do with a non-Guarantor Restricted Subsidiary, but the main point is to note that all companies that are part of the Restricted Group are subject to the agreements and are restricted subsidiaries. It is only after the designation as an unrestricted subsidiary that a subsidiary is not subject to the agreements; As more and more companies face liquidity problems and short-term debt maturities, they are looking specifically at the exceptions contained in their policy and credit agreements in order to achieve a complete or partial restructuring of their capital structure. Investments in “unlimited subsidiaries” are an exception to the investment pacts used to provide flexibility in restructuring a company`s capital structure.

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