A current event consists of a current happening taking place in America at the present time.You may also bring in a current event relating to a topic not found in the book but relating to business mathematics. Please include a double-spaced and typed, one paragraph summary with your current event. This paragraph should be a minimum of five sentences highlighting the key points of the article. Provide a copy of the article with your submission.

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The Gap Spinoff of Old Navy
Could Be Bad for Its Credit But
Good for Its Bonds
Here’s a riddle: When is a corporate deal bad for a company’s credit but good
for its bonds? The spinoff announced last week by Gap Inc. provides one
The back story. Gap stock (ticker: GPS) rallied 16% the day after the retailer
said it would spinoff its fast-growing Old Navy brand into a separate company.
That deal would split the company’s revenue sources nearly in half: Old Navy
earns $8 billion in annual revenue, while Gap’s other brands bring in $9 billion.
This split is occurring as the broader retail industry is under pressure.
What’s new. Gap has a $1.3 billion bond outstanding, and it matures in 2021,
one year after the projected closing of the spinoff. The bond’s price was little
changed after the news, according to Bloomberg data, even after S&P
Ratings put the company’s credit rating on watch for a downgrade. (Gap
already has a high-yield rating, BB+, which is one level below investment
grade.) S&P said that “the loss of Old Navy weakens the company’s
competitive position.”
Looking ahead. A quick read of the company’s bond documents raises
questions about whether this transaction would be considered a “change of
control.” That appears to depend on the structure of the transaction: If the
equivalent of 51% of the company’s shares are transferred to a different entity
and its credit rating gets downgraded, the company could be required to buy
back its bonds at a 1% premium. So CreditSights analysts say that the
company might decide to take the initiative and save some cash, by using a
different contractual provision to buy back its bonds at a premium before the

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