Builder Basket
Corporate Credit Analysis glossary · Credit Agreements & Covenants
Definition
A restricted-payments allowance that grows with cumulative consolidated net income or EBITDA, allowing the borrower to make additional dividends, investments, or junior debt repayments over time.
Builder Basket in plain English
When a company borrows money, lenders usually restrict how much cash it can hand out to owners (dividends) or spend on side bets, so the company doesn't get drained. A builder basket is a permission bucket that grows as the company earns profits — the more money it makes over time, the bigger the allowance it 'builds up' to pay dividends, make investments, or pay down lower-priority debt. It's like an allowance that increases the more chores you complete: reward the borrower for actually being profitable, while still capping what it can do when times are lean.
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