medium · Debt Capital Markets bond-instruments-structures

What is the primary reason for the 'Minimum Remaining Principal' requirement in an equity clawback provision?

1. To ensure the company stays sufficiently levered to maintain its existing high-yield credit rating and spread.
2. To stop the issuer from spending all available cash on debt retirement rather than on its core business operations.
3. To protect the liquidity of the bond for the remaining investors by preventing the issue from becoming too small to trade.
4. To comply with senior secured bank lending covenants that mandate a minimum amount of subordinated junior capital in the stack.

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