Case | HBS Case Collection | August 2013 (Revised November 2013)

Gordon Brothers: Collateralizing Corporate Loans by Brands

by Paul Healy and Maria Loumioti

Abstract

The case explores the collateralization of intellectual property in a loan agreement between a highly leveraged apparel company and a large US bank. Leveraging intangibles in the credit market is a new practice that has significantly grown over the past few years. However, estimating their liquidation value is not directly intuitive, since intangibles are highly illiquid assets and have uncertain future cash flows. Can banks reliably secure corporate loans by intellectual property, and how can they alleviate the challenges in estimating a loan-to-value ratio for this collateral?

Keywords: Intangible assets; Accounting; Valuation; Finance; Restructuring; United States;

Citation:

Healy, Paul, and Maria Loumioti. "Gordon Brothers: Collateralizing Corporate Loans by Brands." Harvard Business School Case 114-016, August 2013. (Revised November 2013.)