medium · Private Credit & Debt documentation-covenants-terms
A borrower has $20M EBITDA and $80M Senior debt (4.0 ×). It acquires a target for $40M (100% debt funded) that contributes $10M in EBITDA.
If the agreement permits incremental debt on a 'no-worse-than' leverage basis, is the transaction permitted?
- Yes, because pro-forma leverage is 4.0 × (unchanged)
- Yes, but only if they use a Freebie basket
- No, because the borrower incurred $40M in debt
- No, because 4.0 × is too high for middle-market deals
Sign up free to see the explanation and track your rank →
More Private Credit & Debt documentation-covenants-terms practice
- If the current SOFR rate drops to 0.25%, what is the all-in interest rate the borrower mus
- A borrower's credit agreement includes a 'Negative Pledge'.… — Is this allowed?
- A loan is priced at SOFR + 600 bps with a 1.0% floor. If the current SOFR rate is 0.5%, wh
- If Term SOFR is currently 0.75% and the loan was issued with a 2.0% Original Issue Discoun
- What is the company's 'covenant headroom' in EBITDA terms?
- Is the company in default?
- A loan agreement specifies that the borrower's Total Leverag… — How should this covenant b
- What is the immediate consequence for the CLO Equity holders?