What are debt baskets

If limitations are in place for a specific type of debt, or for funds earmarked for particular purposes, the covenant or agreement is known as a debt basket. In more extreme cases, lenders may demand the company not take on additional debt until repayment of their bond is complete.

What is a starter basket credit agreement?

Starter Basket Amount: a starting amount (commonly referred to as a “starter basket amount”) which, unlike the incremental starter amount, is not necessarily based on a percentage of the borrower’s EBITDA but is, instead, generally determined on a case-by-case basis (which amount may be further increased by a grower …

What is a basket in law?

In the context of mergers and acquisitions, or a commercial transaction, a basket is a provision in a purchase and sale agreement that limits an indemnifying party’s obligations to indemnify another party for small losses or claims. The basket establishes a monetary threshold.

What is a general basket?

GENERAL BASKET ∎ an uncapped amount subject only to a financial ratio test.

What is an available amount basket?

An available amount basket (also commonly referred to as the “cumulative amount”) automatically increases a borrower’s ability to take actions under negative covenants that generally restrict cash outflow (i.e., investments, dividends and payment of junior indebtedness) to the extent a borrower has built up capacity of …

Is Negative pledge a security?

A negative pledge is a contract provision prohibiting the debtor in a contract from creating security interests over specified property assets. … It does not give rise to a security interest because it does not grant the creditor any proprietary interest in the debtor’s property.

What is a build up basket?

The “builder basket” concept, typically defined as a “Cumulative Credit” or an “Available Amount”, represents an amount the borrower can utilise for investments, restricted payments (as discussed below), debt prepayments or other purposes.

What is a freebie basket?

A free and clear term loan or debt basket also called a freebie basket, which could be used by companies to take on more debt over time without having to face certain restrictions such as debt incurrence tests.

What is ECF sweep?

Excess Cash Flow Sweep (Banking & Finance Glossary) A provision in a Credit Agreement whereby a certain amount of Excess Cash Flow is required to be prepaid by the Borrower. The Borrower and the Lenders will negotiate when and what percentage of excess cash flow is required to be prepaid to the Lenders.

What are restricted debt payments?

Restricted Debt Payment means any payment, prepayment, purchase, repurchase, redemption, retirement, defeasance or other acquisition for value of any Restricted Indebtedness.

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What is a deductible basket?

A basket deductible limits indemnification obligations in order to prevent an indemnifying party from being liable for inaccuracies in, or breaches of, certain representations until losses exceed a specified minimum amount. Businesses may agree to use a basket deductible when going through a merger or an acquisition.

What is basket and de minimis?

Baskets are often agreed in connection with de minimis clauses. In this process, the claim items are first pooled, and can only be reimbursed or a claim made once the agreed sum (the threshold) is exceeded. … When a deductible basket is agreed, only claims that exceed the agreed amount can be submitted (excess only).

What is a de minimis claim?

Related Content. In the context of warranty claims under an acquisition agreement, the specified minimum amount below which no individual claim for breach of warranty can be made. In a wider legal context, something regarded by a court or a party as too small to be meaningful or taken into consideration.

What is retained excess cash flow?

Retained Excess Cash Flow means a cumulative amount equal to the sum of the products, for each Excess Cash Flow Period since the Closing Date, of (a) the applicable Retained Percentage for such Excess Cash Flow Period, multiplied by (b) Excess Cash Flow for such Excess Cash Flow Period.

What is limited condition transaction?

Limited Condition Transaction means any acquisition or Investment by one or more of the Borrower and its Restricted Subsidiaries of or in any assets, business or Person permitted by this Agreement the consummation of which is not conditioned on the availability of, or on obtaining, third party financing. Sample 2.

What is a limited condition acquisition?

Limited Condition Acquisition means any acquisition by one or more of the Company and its Restricted Subsidiaries of any assets, business or Person whose consummation is not conditioned on the availability of, or on obtaining, third party financing.

What is quasi security?

Quasi-security is the term used to cover a broad range of arrangements which are not strictly speaking security but have a similar economic effect. Quasi-security provides protection for the party receiving it and can increase the likelihood of a lender being repaid.

What is cross-default clause?

Cross default is a provision in a bond indenture or loan agreement that puts a borrower in default if the borrower defaults on another obligation. For instance, a cross-default clause in a loan agreement may say that a person automatically defaults on his car loan if he defaults on his mortgage.

What is the difference between cross-default and cross acceleration?

In contrast to a cross-acceleration, a cross-default clause in Agreement A causes an automatic event of default under that agreement when the borrower defaults under Agreement B, even if the lender under Agreement B does not accelerate repayment.

What is the meaning of excess cash?

Cash available that is greater than what is planned. Exhibits as greater revenue on its balance sheet. The limit is typically 20 percent.

Is a high NPV good or bad?

A positive NPV means the investment is worthwhile, an NPV of 0 means the inflows equal the outflows, and a negative NPV means the investment is not good for the investor.

What are the costs of holding too much cash?

3 months6 monthsOne adultOne adultComfortable£1,022£2,044Non-essential£2,328£4,657All expenditure£6,349£12,698

What is free and clear basket?

The “free and clear” basket is a fixed amount that the borrower is permitted to incur without having to demonstrate pro forma compliance with a financial ratio.

What is an inside maturity basket?

Related Definitions Inside Maturity Basket means Indebtedness in an aggregate principal amount not to exceed $400,000,000 at any time outstanding, as designated by the Borrower from time to time.

What is accordion debt?

A debt accordion, also known as an incremental facility, is a provision that allows a borrower to expand the maximum amount allowed on a line of credit (LOC), or to add a term loan to an existing credit agreement.

What is temporal subordination?

Temporal subordination. Debt or other obligations (such as, mandatorily redeemable preferred stock) of the issuer, which mature or are otherwise payable prior to the bonds, are also effectively senior in right of payment to the bonds.

What is a non tipping basket?

A “non-tipping” (or true “deductible”) basket (illustrated in italics in the sample language in paragraph (a) above) provides that once the $X basket amount is exceeded, the Seller is only liable for losses in excess of $X.

What is a basket aggregate?

Basket Aggregate — an aggregate loss limit (or deductible) applicable to multiple lines of coverage.

What is uncapped indemnification?

So for “direct damages” (between the two parties directly involved in the deal), this cap makes sense. Indemnification: By contrast, indemnification, for third party claims, are typically uncapped. … These are now outofpocket expenses paid to a third party rather than direct damages to the counterparty.

What is de minimis rules?

DE MINIMIS RULE BASICS The de minimis rule states that if a discount is less than 0.25% of the face value for each full year from the date of purchase to maturity, then it is too small (that is, de minimis) to be considered a market discount for tax purposes.

Can indemnification be capped?

An indemnity cap is one typical limitation on indemnity liability in private company M&A transactions. While a cap is commonplace in M&A agreements, so are exceptions to the cap (i.e., situations where the cap on indemnity does not apply).