"Stonegate Blocker" Ropes In Asset Sale LMTs
Alastair Gillespie, J.D. Senior Covenant Analyst
- Covenant Review
17 February 2026
- How the Stonegate blocker attempts to restrict asset sale dropdowns and protect bondholders.
- Which carveout provisions weaken the blocker and create potential loopholes for issuers.
- What strengthened application of proceeds requirements mean for controlling asset sale proceeds.
- How complementary covenant terms reinforce the blocker to limit liability management transactions.
- Why this blocker matters for managing structural subordination risk in distressed scenarios.
The Bottom Lineâ„¢
Stonegate and Pfleiderer sold valuable assets to Unrestricted Subsidiaries. This approach bypassed their limited investment capacity constraints.
Maxeda’s restructuring introduces a blocker targeting asset sale transactions. The blocker aims to regulate these liability management techniques.
Asset transfers exceeding certain thresholds outside restricted groups are prohibited. However, exceptions exist for legitimate business purposes and third parties.
Subjective carveouts allow issuers to interpret provisions quite narrowly. Additionally, investors must challenge questionable transactions after they occur.
Strengthened application requirements govern how asset sale proceeds are used. Market participants may find this approach useful despite inherent limitations.
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