hard · Corporate Credit Analysis

A 'Springing' covenant in a revolving credit facility is generally seen as providing less protection than a standard 'Maintenance' covenant because:

1. It applies only to the interest rate margin, not to the principal repayment.
2. It only triggers when the borrower is already in a state of high utilization and likely cash stress.
3. It allows the borrower to unilaterally increase the leverage limit during a recession.
4. It is an 'incurrence' test that only applies when new debt is issued.

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