Our Legal Insights Blog

In the final episode of our series on Debunking Common Covenant Myths, we clarify the wide flexibility that management has to apply asset sale proceeds. Some market participants believe that asset sale proceeds can only be applied to repay debt or reinvest in the business.

The fourth in our series of common covenant myths is that EBITDA add-backs are only found in the definition of “Consolidated EBITDA”, and nowhere else in the offering memorandum or senior facilities agreement.

Another common covenant myth that we hear all the time at FLT is that management must calculate capacity at the time an action is taken, that is, when debt is incurred, or a dividend is declared.

Welcome to day two of our Debunking Common Covenant Myths mini-video series, where we explore adventures in covenant calculations – specifically, we bust the myth that the debt figure used for covenant calculation purposes is the same debt figure that’s presented on the balance sheet.

Welcome to the first in our mini-video series on Debunking Common Covenant Myths! We’re starting with a topic of critical importance to lenders, whether they’re seeking to protect their existing investment or looking to make a lucrative new one – Priming Debt Analysis.

The festive season is underway, and FoxLegal Training is celebrating its first year, so we have a special treat instore to celebrate. Starting tomorrow we will post a new video each day fromour new video series on Debunking Common Covenant Myths, presented by yourstruly!

In what alternate universe do borrowers never generate losses, secured debt doesn’t mean secured debt, and EBITDA growers upward-adjust fixed baskets that never reduce back down?

The bottom line is that lenders will never get their estimations of capacity 100% accurate because management has access to all data and significant discretion on how to calculate it. Indeed, it’s very likely that their law firm will do the calculating – and two different law firms may well get two different numbers.