Incurrence covenant meaning

This glossary sets out many of the expressions commonly used in the leveraged finance market. Words appearing in the definitions in bold are defined elsewhere in this glossary. For further banking terminology, please refer to the main Banking & Finance Glossary... Acquisition finance glossary—A Acceleration Acceleration is the formal action taken by the agent, on the instructions of the majority lenders, following an event of default, such as making a demand for early repayment of the loan. See Practice Note: Accelerating a loan for more information... Accordion feature/accordion facility An accordion, also called an incremental debt feature, is a mechanism in the facilities agreement that, provided specified conditions are satisfied (for example, pro forma compliance with a leverage test), permits those lenders under the facilities agreement who wish to do so to advance additional debt. The terms for that extra debt are typically captured in an increase notice. This accordion or incremental debt flexibility is different from structural adjustment, which usually requires the majority consent...

This glossary sets out numerous expressions regularly encountered in the restructuring & insolvency sphere. Words shown in bold within definitions are themselves explained in other entries in this glossary as well. A Article X The MLIJ contains a single provision named Article X, aimed at jurisdictions that have already implemented the MLCBI, like England, or are weighing its adoption. Article X states: ‘Not withstanding any prior interpretation to the contrary, the relief available under [insert a cross-reference to the legislation of this State enacting Article 21 of the UNCITRAL Model Law on Cross-Border Insolvency] includes recognition and enforcement of a judgment’ (see Practice Note: UNCITRAL model law on recognition and enforcement of insolvency-related judgments (MLIJ): Article X). Asset-backed security (ABS) A form of security anchored by asset pools, for example loans, leases, and credit card receivables. Assimilated law From 1 January 2024, ‘retained law’ has been retitled ‘assimilated law’. The body of domestic law originally arising from EU obligations, created by the European...

Financial covenants feature across many types of banking deal to monitor and assess the financial performance of the borrower company or group. This Practice Note outlines the role of financial covenants within leveraged finance. It covers: the meaning of financial covenants how financial covenants operate in leveraged finance transactions the covenant package typically used on a classic leveraged finance transaction the methods for testing financial covenants other applications of financial ratios, and equity cure, mulligan and deemed cure provisions See the Glossary of acquisition finance terms and jargon for definitions of certain expressions used in this Practice Note. What are financial covenants? Undertakings (also called ‘covenants’) are promises from the borrower (and sometimes other members of the borrower’s group) to the lender about carrying out, or refraining from, particular actions. Financial covenants are a distinct category of covenant or undertaking. They are commitments to achieve or maintain specified financial thresholds. Financial covenants allow the lender to...