What is double/tripple dip?
Would really appreciate a breakdown, all the stuff lawyers write on this might aswell be russian.
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simple explanation is that you get two shots/or two separate avenues/two claims against assets to drive recovery for your bond claims.
more worded explanation is imagine you have a parentco and non guarantor opco. There is debt issued at the opco and the company upstreams the proceeds from the debt issuance to parentco thereby creating an intercompany loan from opco to parentco. So now the creditors at the opco have two avenues 1) claims against assets at opco and 2) claims against intercompany loan recoveries that pledged to them as collateral. So the creditors at opco could benefit from enhancing their recovery based on recoveries on the intercompany loan on top of whatever they get at the opco level
working simple example is (ignore numbers): parentco has 50mm of asset value and 100mm of debt, a non guarantor opco now issues 50mm of debt against 50mm of assets and upstreams 50mm of proceeds to holdco via an intercompany loan. Years later the company files for bankruptcy.
now in ch11, the opco assets are worth 40mm, so creditors recover 1) 40mm/50mm = 80c and 2) whatever the recovery is via interco loan
at the holdco, assets are still worth 50mm against 100mm of holdco debt and 50mm of interco loan. So 50mm of assets against 150mm of claim. So recovery is ~33c. So the interco loan recovers 33c.
So the total opco creditor recovery is 80c from opco assets + 33c*50mm (~16.5c) from interco loan = 96.5c of total recovery due to the benefit from the "double dip" claim via interco loan instead of just the 80c recovery from the claim against opco assets ex interco loan.
obviously this is just a simple explanation. It could get a lot more complex in different forms but this should be a starter
And to add on, the triple dip is just when you have a third claim against said assets. The fundamentals of those first two dips don't change, you just tack on another "dip". For example, bondholders in the Spirit case found a third claim against Spirit in termination damages from a brand IP licensing agreement. Do check out Pari's Triple Dip article though.
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