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TRANSPORTATION: FedEx (FDX: Baa2/BBB): 10% Asset Sale Covenant

TRANSPORTATION
USBulletCredit BulletsNorth America
  • FedEx has a clause in its bonds which is designed to protect bondholders from the company selling 10% or more of the company's assets
  • FedEx Freight is listed as a Subsidiary Guarantor
  • The docs say that "we will not sell or dispose of any subsidiary guarantor whose assets exceed 10% of our consolidated total assets .... unless at least 75% of the net proceeds of such sale or disposition will consist of.... " .. cash, property or assets or interests in companies...
  • In the event that the net proceeds from the sale or disposition of a 10% subsidiary guarantor consist of cash or readily marketable securities, we will apply, within 12 months of such sale or disposition, an amount equal to 100% of the fair market value, as determined in good faith by our board of directors, of such net proceeds to: ....repay unsubordinated indebtedness of FedEx or any subsidiary guarantor.....
  • Obviously, bondholders should seek their own counsel on any legal matters. But it does seem that holders have some meaningful protection here against being left in a smaller more leveraged company.
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  • FedEx has a clause in its bonds which is designed to protect bondholders from the company selling 10% or more of the company's assets
  • FedEx Freight is listed as a Subsidiary Guarantor
  • The docs say that "we will not sell or dispose of any subsidiary guarantor whose assets exceed 10% of our consolidated total assets .... unless at least 75% of the net proceeds of such sale or disposition will consist of.... " .. cash, property or assets or interests in companies...
  • In the event that the net proceeds from the sale or disposition of a 10% subsidiary guarantor consist of cash or readily marketable securities, we will apply, within 12 months of such sale or disposition, an amount equal to 100% of the fair market value, as determined in good faith by our board of directors, of such net proceeds to: ....repay unsubordinated indebtedness of FedEx or any subsidiary guarantor.....
  • Obviously, bondholders should seek their own counsel on any legal matters. But it does seem that holders have some meaningful protection here against being left in a smaller more leveraged company.