Golden Goose 2026 High Yield Issuance

On Tuesday (14 April), Golden Goose (through GG12 S.p.A., an SPV holdco as the Issuer) priced its latest EUR 350m Floating Rate and EUR 530m 6¼% Senior Secured Notes due 2033 (the “2026 Notes”).

The 2026 Notes were issued as part of the funding for the Golden Goose (GG) Group LBO by a consortium of investors, including Hong Shan Capital Advisors Limited (or “HSG”) as the Sponsor (and majority investor), as well as refinancing GG’s existing debt, including its EUR 480m Senior Secured FRNs due 2031 that were issued less than a year ago on 15 May 2025 (the “2025 Notes”).

General Flexing

From a covenant perspective, relatively few substantive changes were made as between the 2025 Notes and the 2026 Notes. Generally, the loosening of terms included the introduction of leverage-based portability at 3.9x Consolidated Net Leverage Ratio (the ostensible opening CNLR level) and the extension of the exercise period for the 102% IPO call provision from being co-extensive with the non-call period under the 2025 Notes (comprising only FRNs) to the entire tenor of the 2026 Notes (which also include fixed rate notes).

Yet, that’s not all…and not the focus of this Special Report.

The Asset-Strip Slip

By contrast, the specific change that caught our eye for present purposes is so obscure as to be mistaken for being comparatively anodine.

It is merely the removal and variation of a few words from one of the exceptions to the definition of “Asset Disposition”, as illustrated below:“

Notwithstanding appearances, we believe the effect of such a change – if the revised language is to be interpreted in accordance with its plain English meaning – has such a detrimental impact as to pose a potentially existential threat to the very function of the asset sales covenant.

In our view, this (additional¹) variation to the exclusion from what constitutes an “Asset Disposition” removes entirely from the reach of the asset sales regime any asset sale the (net available cash) proceeds of which the Issuer uses to fund Restricted/Permitted Payment or Permitted Investment (PI) capacity that exists under the restricted payments (RPs) covenant. That means that such asset transfers do not need to meet the following fundamental criteria enshrined in the asset sales covenant:

1. Fair market value;

2. 75% cash consideration; and

3. not only the requirement to comply with the Application of Proceeds (“AoP”) Menu within the prescribed 365 days (+ 180 days where a binding commitment exists) reinvestment period to use the transfer proceeds to either deleverage or pay for other business assets/activities²; but also

4. even the eventual requirement that an Asset Disposition Offer be made with Excess Proceeds over EUR 52m/20% EBITDA not otherwise applied as prescribed by the AoP Menu within the reinvestment period.

In other words, this modification arguably affords the Issuer a straight right to deplete the Issuer’s asset base directly for cash leakage, to the extent such RPs or PI capacity exists under the RPs covenant. Just to give readers an idea of what this means in practical terms in the context of the 2026 Notes, in our report on the 2026 Notes, we calculate aggregate Day One RPs and Investments capacity as EUR 366m (or almost 142% Run Rate Adjusted EBITDA). So, theoretically, the Issuer could sell/transfer assets worth up to EUR 366m and use the proceeds to fund its RPs/PI capacity allowed under its RPs covenant, thereby circumnavigating its asset sales covenant altogether by virtue of such clever drafting.

This is not the first time we have come across such a nefarious mechanism. See our Special Report of 12 March 2018: “Developments on Asset-Stripping for Dividend Gain in European High Yield” in which we identified such permissive language as “asset-stripping for permanent dividend gain”. At the risk of sounding alarmist: in the current environment of heightened anxiety about issuers and borrowers exploiting covenant weaknesses in their financing documents to engage in liability management exercises (“LMEs”), we would exhort investors to be mindful of the “fine print”, instead of insisting on so called “LME Blockers”, the effect of which is – more often than not – merely cosmetic³.

1 See our 2018 Special Report linked below for more detail about how the remit of this particular exception to the “Asset Disposition” has evolved in European high yield bonds over the years. 

2 NB. This was the only condition disapplied by the formulation of the “Asset Disposition” exception appearing in the 2025 Notes –constituting what we have dubbed in the past: “asset stripping for temporary dividend gain”. 

3 Case in point: a “J Crew Blocker” was introduced into the 2026 Notes by virtue of the Pricing Supplement dated 14 April 2026, which does nothing to address the mischief presented by the asset-stripping for permanent dividend gain phenomenon