easy · Private Credit documentation-covenants-terms
A direct lender requires a 'Material Adverse Change' (MAC) clause in the credit agreement.
What is the primary function of this clause?
- It allows the lender to refuse further funding or declare a default if there is a fundamental deterioration in the borrower's business or financial condition.
- It grants the lender the immediate contractual right to seize control of the company's board of directors and replace its senior management officers.
- It automatically and continuously adjusts the loan's interest rate margin upward whenever broader market volatility or credit spreads increase materially over time.
- It prohibits the borrower from changing its senior management team, core business line, or overall corporate structure at any time without prior written lender consent.
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