What are incurrence covenants?

What are incurrence covenants?

An incurrence covenant provides that an issuer may take a specified action (such as incurring debt, paying dividends, repurchasing its shares or making certain investments) only if, upon completing the action and pro forma for its occurrence, the issuer meets the test prescribed by that covenant.

What is an example of a negative covenant?

A negative covenant is an agreement that restricts a company from engaging in certain actions—it is a promise not to do something. For example, a covenant entered into with a public company might limit the amount of dividends the firm can pay its shareholders.

What is the difference between a positive and negative covenant?

An affirmative covenant, also referred to as a positive covenant, is a promise that requires a party to adhere to specific terms of the agreement. It is the opposite of a negative covenant, which requires a party to avoid doing something.

What is the difference between incurrence and maintenance covenants?

Maintenance covenants are tested regularly — often as frequently as every three months — and are common for heavily indebted companies, for example companies bought out by private equity firms using leverage. Incurrence covenants are tested for a specific event, such as when a borrower wishes to take out more debt.

What is a positive covenant example?

Examples of public positive covenants include: to construct all buildings only within a specific site shown on the face of the plan. to construct and maintain a storm water retention basin system. to maintain a building and its foundations, to ensure the safe working of a railway passing beneath it.

What are the different types of covenants?

There are several covenants in the Bible, but five covenants are crucial for understanding the story of the Bible and God’s redemptive plan: the Noahic Covenant, the Abrahamic Covenant, The Mosaic Covenant, the Davidic Covenant and the New Covenant.

What is a negative covenant law?

A covenant is a form of agreement that creates an obligation. If the covenant affects land it remains in force regardless of any change of proprietorship. A restrictive covenant, also known as a negative covenant, creates an obligation to refrain from doing something.

What is an unconditional covenant?

Unconditional covenants, God makes promises that are His actions only, and God never lies thus. these covenants are unconditional.

Can you remove a covenant?

To do this, you’ll need to apply to remove the restrictive covenant. An application to remove or modify the restrictive covenant can take between 18 and 24 months to go through. If the party controlling the covenant can still enforce the ruling, consider negotiation, but be prepared for them to want compensation.

What is an example of a positive covenant?

positive covenant A clause in a loan agreement that requires a specified action by the borrower. For example, a positive covenant may mandate that the borrower maintain a specific level of working capital or issue periodic reports to creditors.

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