Trap door provision

Covenant concept · also called trapdoor; J.Crew trap door

An investment basket letting a non-loan-party restricted subsidiary reinvest proceeds it received from permitted investments. In J.Crew it moved trademarks to an unrestricted subsidiary beyond the investment capacity lenders expected.

Associated with J.Crew (2017)

Discussed at ¶¶ 7.15, 13.46 of Liability Management Exercises: Law and Practice.