Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1494417
Restricted Payments Covenant – How Does It Work under Various Instruments? HIGH YIELD FACILITY B TERM LOAN PIK • Builder Basket: 50% CNI, plus some builders for new equity and reductions in investments • Carve-outs now usually include some form of leverage-based test as well Investments: • Subject to RP covenant, plus Permitted Investments definition • Builder Basket: • Based on retained excess cash flow or 50% of CNI (retained excess cash flow formulation is more investor friendly) • May include a starter amount with EBITDA grower Investments: • Subject to RP covenant, plus Permitted Investments definition • Cap on investments in non-guarantor restricted subsidiaries • No restricted payments allowed through the RP basket Investments: • Investments are allowed, in each case depending on the structure and the rationale for the PIK deal 23 The Debt Stack – Structuring and Incurrence Covenants