hard · Corporate Credit Analysis
A borrower has a $200 million builder basket and wants to pay a $50 million dividend. However, the 'limitation on debt' covenant is currently being breached.
Can the borrower still use the builder basket for the dividend?
- No, because restricted payments usually require that no default or event of default exists.
- No, unless they use the General Basket instead of the Builder Basket.
- Yes, provided the builder basket was created before the debt breach occurred.
- Yes, because the dividend is an equity event unrelated to the debt covenant.
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