Each Note Guaranty will be limited to the maximum amount that would not render the Guarantor’s obligations subject to avoidance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable provision of state law. By virtue of this limitation, a Guarantor’s obligation under its Note Guaranty could be significantly less than amounts payable with respect to the notes, or a Guarantor may have effectively no obligation under its Note Guaranty. See “Risk Factors—Risks Related to the Notes—Fraudulent transfer statutes may limit your rights as a holder of the notes.”
The Note Guaranty of a Guarantor will terminate upon:
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(1) | a sale or other disposition (including by way of consolidation or merger) of the Guarantor or the sale or disposition of all or substantially all the assets of the Guarantor (other than to HRG or a Subsidiary of HRG) not prohibited by the Indenture; |
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(2) | a Guarantor ceases to guarantee any Debt of HRG; or |
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(3) | defeasance or discharge of the notes, as provided in “—Defeasance and Discharge.” |
As of the date hereof, there are no Guarantors.
Ranking
The indebtedness evidenced by the notes ranks equally in right of payment with existing and future senior Debt of HRG and is secured on an equal basis with all other existing and future Pari-Passu Obligations (as defined below) by a first-priority security interest in the Collateral as described under “—Collateral”.
As of September 30, 2015:
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• | HRG had no other Debt which would be pari passu in right of payment with the notes and would be secured on an equal basis with the notes. |
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• | Subject to the limits described under “—Certain Covenants—Limitation on Debt and Disqualified Stock” and “—Limitation on Liens”, HRG may incur additional Debt, some of which may be secured. |
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• | The total liabilities of HRG on an unconsolidated and consolidated basis were $1.8 billion and $30.7 billion, respectively. |
HRG is organized and intended to be operated as a holding company that owns Equity Interests of various Subsidiaries. It is not expected that future-operating Subsidiaries will guarantee the notes. Claims of creditors of non-guarantor Subsidiaries, including trade creditors, and creditors holding debt and guarantees issued by those Subsidiaries, and claims of preferred stockholders (if any) of those Subsidiaries generally will have priority with respect to the assets and earnings of those Subsidiaries over the claims of creditors of HRG, including holders of the notes, and holders of minority equity interests in such Subsidiaries will have ratable claims with claims of creditors of HRG. The notes therefore will be effectively subordinated to creditors (including trade creditors) and preferred stockholders (if any) of Subsidiaries of HRG. As of September 30, 2015, the total liabilities of Spectrum Brands were approximately $5.7 billion, including trade payables. As of September 30, 2015, the total liabilities of FGL were approximately $23.4 billion, including approximately $17.8 billion in annuity contractholder funds, approximately $3.5 billion in future policy benefits and approximately $300.0 million of indebtedness under the FGH Notes. As of September 30, 2015, the total liabilities of HAMCO were approximately $1.4 million and were approximately $379.4 million when consolidated with the Asset Managers. As of September 30, 2015, the total liabilities of HGI Energy were approximately $502.0 million.
The Indenture does not limit the incurrence of Debt (or other liabilities) and Disqualified Stock of Subsidiaries that are not Guarantors. See “—Certain Covenants—Limitation on Debt and Disqualified Stock.”
HRG’s ability to pay interest on the notes is dependent upon the receipt of dividends and other distributions from its Subsidiaries. The availability of distributions from its Subsidiaries will be subject to the satisfaction of various covenants and conditions contained in the applicable Subsidiary’s existing and future financing and organizational documents, as well as applicable law, rule and regulation. See “Risk Factors—Risks Related to the Notes—We are a holding company and our only material assets are our equity interests in our operating subsidiaries and our other investments; as a result, our principal source of revenue and cash flow is distributions from our subsidiaries; our subsidiaries may be limited by law and by contract in making distributions to us.”
Security
General
HRG’s obligations under the notes and the Indenture are secured by a first priority Lien on all assets of HRG (other than Excluded Property, and subject to certain Permitted Collateral Liens), including without limitation:
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• | all Equity Interests of our directly owned subsidiaries (Spectrum Brands, FS Holdco II Ltd., HGI Funding, LLC, HGI Energy Holdings, LLC and HGI Global Holdings, LLC) and related assets, including all general intangibles under contracts (including without limitation, the registration rights agreement) that HRG has with Spectrum; |
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• | all cash and investment securities owned by HRG; |
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• | all general intangibles owned by HRG; and |
