medium · Debt Capital Markets
Which of the following describes a 'springing' financial covenant on a Revolving Credit Facility (RCF)?
- A provision that automatically increases the interest margin as the company's leverage rises.
- A covenant that requires the borrower to repay the RCF immediately if a rating agency downgrade occurs.
- A maintenance covenant that is only tested if the borrower's utilization of the RCF exceeds a certain threshold.
- An incurrence covenant that is triggered only when the borrower issues new high-yield bonds.
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