medium · Private Credit documentation-covenants-terms
A borrower's EBITDA falls from 40M to 30M. Debt is 180M. The leverage covenant is 5.0×. The borrower also has a 'Springing Covenant' on its revolver that activates at 35% utilization.
If the revolver is 20% drawn, is the borrower in default?
- Yes, because the EBITDA decline constitutes a Material Adverse Change
- Yes, because leverage of 6.0x exceeds the 5.0x limit
- No, because the springing covenant has not been triggered
- No, because the borrower has a 30-day cure period
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