Probably very silly question 
but can anyone please explain difference between restriced and non-restricted status of subsidiary/parent when it comes to debt and interest payments? It is completly unintuitive to me…
Thanks in advance!
Yeah, i wanted to ask the same thing. I think they explained it contradictory in schweser.
First we have sentence on page 139 book 4:“A subsidiary’s debt covenants may restrict the transfer of cash and assets upstream to the parent company before the subsidiary’s debt is serviced. In such a case, even though the parent company’s bonds are not junior to subsidiary’s bonds, the subsidiary’s bonds have higher priority of claim to the subsidiary’s cash flow. Thus the parent company’s bonds are effectively subordianted to the subsidiary’s bonds.”
Ok, according to this if the subsidiary is restricted it benefits the bondholders of subsidiary’s bonds and is negative for parent’s bondholders.
But than we have another explanation few pages later (154):“Restricted vs. unrestricted subsidiaries. Issuers can classify subsidiaries as restricted or unrestricted. Restricted subsidiaries’ cash flow and assets can be used to service the debt of the parent holding company. This benefits creditors of holding companies because their debt is pari passu with the debt of restricted subsidiaries, rather then be structurally subordianted.”
Than we have the opposite conclusion with respect to the second statement. If the subsidiary is restricted it benefits the parent holding company’s bondholders rather than subsidiaries bondholders.
What is the correct view here!?
I have no idea… We need some great minds here 
Ok, i tried google learning and it appears they got it right in the second statement. If subsidiary is restricted it’s assets and cash flows can be used to pay down debt of parent company if it is unrestricted than it’s a no go.
Good stuff man! much apreciached!