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J. Crew Loan Lets Lenders Pay Themselves First If They Lose Suit

June 5, 2020, 12:11 PM

Lenders funding J. Crew Group Inc.’s bankruptcy might get sued for their role in the retailer’s controversial 2017 debt restructuring, but if they lose, could wind up paying some of the winnings to themselves.

U.S. Bankruptcy Judge Keith L. Phillips on Thursday approved an unusual clause in J. Crew’s bankruptcy loan that treats any money won in the potential lawsuit as collateral for that same loan. This means if the lenders lose in court, they would first pay themselves before the winning side gets anything.

The unsecured committee would sue on behalf of all creditors of J. Crew. Should...

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