medium · Debt Capital Markets credit-ratings-risk
Which of the following describes a 'springing' financial covenant on a Revolving Credit Facility (RCF)?
- A provision that steps the interest margin upward automatically as the company's measured leverage rises.
- A covenant compelling the borrower to repay the entire RCF immediately upon any rating agency downgrade event.
- A maintenance covenant that is only tested if the borrower's utilization of the RCF exceeds a certain threshold.
- An incurrence covenant triggered only at the point the borrower issues new high-yield bonds into the market.
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