medium · Debt Capital Markets
What is the primary reason for the 'Minimum Remaining Principal' requirement in an equity clawback provision?
- To ensure the company remains levered enough to maintain its high-yield credit rating.
- To prevent the issuer from using all its cash on debt retirement instead of business operations.
- To protect the liquidity of the bond for the remaining investors by preventing the issue from becoming too small to trade.
- To comply with bank lending covenants that require a minimum amount of junior capital in the stack.
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