easy · Private Credit & Debt documentation-covenants-terms
A borrower's credit agreement includes a 'Negative Pledge'. The company later attempts to secure a new lease for a specialized warehouse, granting the lessor a lien on that specific property.
Is this allowed?
- Yes, because negative pledges only apply to current assets
- Yes, provided the new lien is junior to the First Lien debt
- No, negative pledges are absolute prohibitions on all third-party financing
- Only if it falls under a 'Permitted Liens' exception
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 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?
- If the company subsequently raises a 'down round' at $6.00 per share, what is the fund's n