Lecture 3 Bond Docs Flashcards
0
Q
Negative covenants
A
Will not enter into transaction with affiliates, etc (things you will not do)
1
Q
Affirmative Covenants
A
- banks will not give covenants
- negative pledge (ie lender will not offer securities without offering to original holders. Can partly carve out (eg up to 15% can be offered etc)
2
Q
Merger consolidation clause
A
- protect lender from borrower merging with company with an inferior credit profile or from a jurisdiction with poor legal protections for the lender.
3
Q
Events of default clause
A
Will be covered in the doc and will cover payment of interest and principal, financial covenants and other events
4
Q
Financial covenants
A
- interest coverage ratio
- gearing
- loan to value ratio
- leverage
banks were more lenient pre GFC
5
Q
Sale of Assets covenants
A
- cannot use sale of proceeds to pay dividend. Shifting assets from debt to equity holder