Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1494417
Debt Covenant – How Does It Work? (cont.) 19 Proposed Debt Is it Indebtedness? a) In the case of unsecured debt, Fixed Charge Coverage Ratio; b) In the case of secured debt, the Consolidated Senior Secured Leverage Ratio; c) In case of unsecured debt and second lien debt, Total Leverage Ratio Must fit into a "Basket" or other exception under "Permitted Debt" Credit Facilities Basket (1) Capital Lease Basket General Basket Yes Or Other exceptions/carve-outs Examples: existing debt, permitted refinancing, hedging, intercompany debt, certain guarantees, letters of credit, ordinary course debt such as workers' compensation bonds, and acquired indebtedness, acquisition debt/acquired debt (if applicable ratios do not deteriorate) (1) On a bond only deal typically granted super senior status. Not applicable to a loan document using HY covenants. The Debt Stack – Structuring and Incurrence Covenants