Intralot’s drop-down restructuring games: priming pari passu noteholders, circumventing non-consenters and artificially reducing asset values

Intralot is the first European group to restructure its debt using the “J. Crew”-inspired drop-down procedure transferring its unencumbered US business away from unsecured noteholders due to be repaid in 2024 to be used to support secured debt to refinance unsecured notes maturing earlier in 2021. The trustee for the notes due in 2024 is suing and there is a separate claim for fraudulent transfer. In this article the authors explore: how unsecured pari passu and pro rata noteholders came to prime others by becoming senior secured noteholders under the drop-down procedure; how the drop down was achieved by a US subsidiary issuing unsecured notes due 2025 swapping them for the unsecured notes due 2021 issued by a holding company being designated an “Unrestricted Subsidiary” with its shares and assets then being pledged as security for the notes due 2025; how Intralot exploited imprecise...