Most deals guard one door—IP or subsidiaries—but leave the other wide open
Highlights
- IP transfer prohibitions now appear in 24% of deals; unrestricted subsidiary designation restrictions appear in 23%.
- Only 12% of deals include both protections together — full J.Crew blocker coverage.
- A deal with only one protection still leaves a path open: restrict the transfer and a borrower can still designate the subsidiary; restrict the designation and a borrower can still transfer the IP.
By Dan Wertman, originally published on the Noetica blog, now part of Thomson Reuters. May 2025.
Imagine installing expensive locks on your front door, but leaving a window wide open. That’s what most credit deals are doing with J.Crew blocker protections.
Two doors, one lock
Since J.Crew’s infamous 2016 IP transfer, two distinct defenses have emerged in credit agreements: prohibitions against moving valuable IP assets to an unrestricted subsidiary, and separate restrictions on designating a subsidiary as unrestricted in the first place. Most deals include one or the other — not both.
That gap matters more than it might seem. A company with only an IP transfer restriction can still designate a subsidiary as unrestricted and move an entire business unit — not just IP — outside the credit group’s reach; just ask Neiman Marcus about MyTheresa. A company with only a subsidiary designation restriction, meanwhile, can still transfer valuable IP out of the credit group through other means. Guarding one door while leaving the other open isn’t a partial defense — for a determined borrower, it’s effectively no defense at all.
The gap in the data
Noetica’s Q1 2025 data shows both individual protections climbing steadily: IP transfer prohibitions now appear in 24% of deals, and unrestricted subsidiary designation restrictions appear in 23% — both near two-year highs.
But deals requiring both protections together sit at just 12% — barely half of either individual rate. In other words, most lenders who think they’ve closed off J.Crew-style risk have actually only closed one of the two doors it takes to walk through. Full protection means requiring both terms, not either one.
For more deal-term benchmarking like this, explore the latest Capital Markets Radar Report from Noetica, now part of Thomson Reuters.
