hard · Private Credit documentation-covenants-terms

Which single drafting gap most enables the sponsor to manufacture a perpetual cure with minimal cash, and why?

1. The four-quarter and life-of-loan cure caps are simply set too generously for this particular credit, allowing the sponsor far more repeated cures over the loan's full tenor than a genuinely healthy, well-run borrower should ever realistically need to invoke.
2. Treating the cure as an EBITDA addition rather than mandating it be applied to prepay debt, since adding to EBITDA inflates the denominator and lets a tiny contribution swing a leverage ratio that itself is a multiple, requiring far less cash than actually deleveraging.
3. The provision's total silence on whether contributed cure equity also counts toward the separately negotiated equity-cushion calculation used elsewhere in the document, which arguably lets the sponsor double-count those same contributed dollars across two distinct mechanisms.
4. Allowing the cure contribution to be made as of quarter-end itself rather than requiring it strictly within a defined cure period following delivery of the compliance certificate, which needlessly exposes the lender to an awkward and recurring timing mismatch each reporting period.

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