Harbinger Group Inc.
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SEC Filings

S-4
HRG GROUP, INC. filed this Form S-4 on 01/15/2016
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result, the ability of the collateral agent to foreclose upon the equity of FS Holdco II Ltd. or dispose of such equity will be limited by applicable insurance laws.
The right and ability of the collateral agent to foreclose upon the equity of our subsidiaries upon the occurrence of an event of default is likely to be significantly impaired by applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or against us or a subsidiary of ours prior to the collateral agent having foreclosed upon and sold the equity. Under applicable bankruptcy law, a secured creditor such as the collateral agent may be prohibited from foreclosing upon its security from a debtor in a bankruptcy case or from disposing of security repossessed from such debtor without bankruptcy court approval, which may not be given.
Moreover, the U.S. Bankruptcy Code (the “Bankruptcy Code”) may preclude the secured party from obtaining relief from the automatic stay in order to foreclose upon the equity if the debtor provides “adequate protection.” The meaning of the term adequate protection varies according to circumstances, but it is generally intended to protect the value of the secured creditor’s interest in the collateral from any diminution in the value of the collateral as a result of the stay of repossession or the disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case and may include, if approved by the court, cash payments or the granting of additional security. A bankruptcy court may determine that a secured creditor may not require compensation for a diminution in the value of its collateral if the value of the collateral exceeds the debt it secures.
In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the 2019 notes could be delayed following commencement of a bankruptcy case, whether or when the collateral agent could repossess or dispose of the collateral, the value of the collateral at the time of the bankruptcy filing, or whether or to what extent holders of the 2019 notes would be compensated for any delay in payment or diminution in the value of the collateral. The holders of the 2019 notes may receive in exchange for their claims a recovery that could be substantially less than the amount of their claims (potentially even nothing) and any such recovery could be in the form of cash, new debt instruments or some other security. Furthermore, in the event the bankruptcy court determines that the value of the collateral is not sufficient to repay all amounts due on the 2019 notes, the holders of the 2019 notes would have an “undersecured claim,” which means that they would have a secured claim to the extent of the value of the collateral and an unsecured claim for the difference. Applicable federal bankruptcy laws do not permit the payment or accrual of post-petition interest, costs and attorneys’ fees for undersecured claims during the debtor’s bankruptcy case.
If any of our subsidiaries commenced, or had commenced against it, a bankruptcy proceeding (but we had not commenced a bankruptcy proceeding), the plan of reorganization of such subsidiary could result in the cancellation of our equity interests in such subsidiary and the issuance of the equity in the subsidiary to the creditors of such subsidiary in satisfaction of their claims. At any time, a majority of the assets of our directly held subsidiaries can be pledged to secure indebtedness or other obligations of the subsidiary. For example, SBI has pledged the stock of certain of its subsidiaries to secure the indebtedness under SBI’s secured indebtedness. In a bankruptcy or liquidation, 2019 noteholders will only receive value from the equity interests pledged to secure the 2019 notes after payment of all debt obligations of our other subsidiaries that do not guarantee the 2019 notes.
As a result of the foregoing, the collateral agent’s ability to exercise remedies and foreclose on our equity interests in our directly held subsidiaries may be limited.
Foreclosure on the stock of our subsidiaries pledged as collateral could constitute a change of control under the agreements governing our subsidiaries’ debt or other obligations.
If the collateral agent were to exercise remedies and foreclose on a sufficient amount of the stock of Spectrum Brands pledged as collateral for the 2019 notes, the foreclosure could constitute a change of control under the certain agreements governing SBI’s debt. Under SBI’s Senior Credit Agreement, a change of control is an event of default and, if a change of control were to occur, SBI would be required to get an amendment to this agreement to avoid a default. If SBI were unable to get such an amendment, the lenders could accelerate the maturity of the Senior Credit Agreement. The documents governing certain of our subsidiaries' indebtedness contain a change of control provision.
In addition, under the indentures governing SBI’s 6.375% Senior Notes due 2020, 6.625% Senior Notes due 2022, 6.125% Senior Notes due 2024 and 5.75% Senior Notes due 2025 and the indenture governing the FGH Notes, upon a change of control, SBI or FGH, as applicable, is required to offer to repurchase such notes from the holders at a price equal to 101% of the principal amount of the notes plus accrued and unpaid interest. If SBI or FGH were unable to make the change of control offer, it would be an event of default under the applicable indenture that could allow holders of such notes to accelerate the maturity of those notes. In the event the lenders under the SBI loan agreements or holders of SBI’s notes exercised remedies in connection with a default, their claims to SBI’s assets would have priority over any claims of the holders of the 2019 notes. Additionally, in the event the holders of the FGH Notes exercised remedies in connection with a default, their claims to FGL’s assets would have priority over any claims of the holders of the 2019 notes.
Our current and future subsidiaries could also incur debt with similar features in the future.
Perfection of security interests in some of the collateral may not occur and, as such, holders of the 2019 notes may lose the benefit of such security interests to the extent a default should occur prior to such perfection or if such security interest is

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