Equity Cure

Private Credit Glossary

A sponsor's right to inject fresh equity into a borrower within a defined cure period (typically 10–15 business days) after a financial-covenant breach. The cash is applied either to (i) prepay debt — reducing the leverage numerator — or (ii) be deemed an EBITDA add-back for covenant-testing purposes only, increasing the denominator. Subject to typical limitations: frequency cap (2–3 times over the loan's life, no more than 2 consecutive quarters), real-money requirement (cash must come from outside the credit group, not from drawing the revolver), and minimum/maximum cure amount tests. A frequently-used cure signals an underwriting miss, not a solution.

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