medium · Debt Capital Markets
A borrower has a 6.0x maintenance covenant. It has $600 million in Total Debt and $110 million in EBITDA.
If the company issues an additional $100 million in debt to fund a share buyback, what happens to its compliance?
- It breaches the covenant because EBITDA was not adjusted for the buyback.
- It remains compliant because buybacks are usually permitted under debt incurrence tests.
- It remains compliant with a 6.36x ratio.
- It breaches the covenant as leverage rises to 6.36x.
Sign up free to see the explanation and track your rank →
More Debt Capital Markets practice
- In the context of Debt Capital Markets, what is a leverage-based margin ratchet?
- Which officer of a borrower is typically responsible for signing the compliance certificat
- Why is the Administrative Agent's role important for the margin ratchet?
- If a company has a leverage-based pricing grid and SOFR rises significantly while leverage
- What is meant by the 'bond floor' in the context of yield analysis?
- For a bond trading at a discount (below par), which yield measure is typically the same as
- What is a 'call schedule' for a corporate bond?
- If a bond's Yield to Worst is equal to its Yield to Maturity, what can we likely conclude