Stressed retailers like J. Crew and Neiman Marcus are doing something unusual to manage debt

A move by preppy retailer J. Crew to manage its more than $2 billion debt burden may be the start of a worrisome trend.

Moody’s warned Thursday that secured lenders are being put at risk of losses by stressed retailers that are seeking to transfer assets to subsidiaries that are unrestricted by their credit agreements.

Retailers, including J. Crew, Claire’s Stores and Neiman Marcus, have recently moved assets such as intellectual property and stores to unrestricted subsidiaries, so they can raise fresh debt backed by those assets. But they are effectively stripping collateral from their secured lenders and hurting the recovery value of their loans in a bankruptcy scenario.

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