Xerox’s recent joint venture dropdown has elicited considerable debate across the distressed credit landscape. While market participants have largely coalesced around the theory of a minority-stake JV structure designed to circumvent "Unrestricted Subsidiary" regimes — a thesis we explored in our prior LME breakdown and analysis — we believe the transaction could have instead utilized a majority-stake Pluralsight-style modality.
Under this alternative interpretation, Xerox successfully leveraged a specific quantitative gateway to monetize its brand trademarks while bypassing the qualitative hard locks that typically safeguard Material IP. This article examines the prospect that Xerox utilized the $370m basket afforded by Section 418 of the indentures governing the 10.25% Senior Secured First Lien Notes due 2030 and 13.5% Senior Secured Second Lien Notes due 2031, in addition to the greater of $260m and 30% of Consolidated EBITDA basket permitted by Section 6.04 of the First Lien Term Loan B (TLB) credit agreement.
Pluralsight maneuver as a legal gateway
A Pluralsight-style maneuver facilitates the transfer of assets not to an Unrestricted Subsidiary — which generally triggers categorical prohibitions on IP transfers — but to a restricted “Non-Guarantor Subsidiary.” Whereas Xerox’s J.Crew IP blocker focuses on the designation of a Subsidiary...
