medium · Corporate Credit Analysis covenants
A sponsor wants to execute a 'Dividend Recap' using a ratio-based basket that permits dividends if Total Leverage is below 4.0x. Pro-forma for a $100 million dividend, debt is $800 million and EBITDA is $210 million.
Can the sponsor pay the dividend?
- No, because the dividend itself increases leverage beyond the starting point
- No, because pro-forma leverage is 3.8x but the basket is likely empty
- Yes, because pro-forma leverage of 3.8x is below the 4.0x threshold
- Yes, but only if the 'Available Amount' also has $100 million of capacity
Sign up free to see the explanation and track your rank →
More Corporate Credit Analysis covenants practice
- A credit agreement requires a borrower to maintain a Net Lev… — What type of covenant is t
- Ironclad Corp has a credit agreement that requires the firm… — This is an example of what
- In a well-known creditor-on-creditor move, a company transfers its valuable trademarks and
- Serta Simmons Bedding executed a transaction where 65% of it… — What is this tactic called
- What is the primary implication for creditors of the parent company?
- If the company utilizes the full basket to fund an acquisition, what is the minimum EBITDA
- What is the total capacity in the basket for a dividend payment?
- If the company pays a $40M dividend at the end of Year 1, what is the remaining basket cap