medium · Debt Capital Markets credit-ratings-risk
In a distressed credit situation, why might lenders push for a 'gross' leverage covenant instead of a 'net' leverage covenant?
- Because gross leverage is far simpler and faster to calculate during an external audit
- To ensure that the borrower ends up paying a materially higher contractual interest rate
- To prevent the borrower from appearing compliant by simply drawing the revolver and holding cash
- Because net leverage covenants are prohibited and legally unenforceable in certain regulatory jurisdictions
Sign up free to see the explanation and track your rank →
More Debt Capital Markets credit-ratings-risk practice
- In the context of Debt Capital Markets, what is a leverage-based margin ratchet?
- Why is the Administrative Agent's role important for the margin ratchet?
- What happens to the credit spread of a 'fallen angel' issuer?
- In Debt Capital Markets, who is generally the 'payer' of the credit spread in a standard b
- In a cov-lite loan, which event would most likely trigger a financial ratio test?
- In the context of credit covenants, what is the primary difference between a maintenance c
- In a Credit Default Swap (CDS), what is the primary obligation of the protection seller?
- Which of the following is NOT typically a 'Restricted Payment'?