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Sample Covenants/Security

Required

• Unconditional promise to pay

Strongly Preferred

• Gross Revenue or Gross Receivables pledge
• Negative pledge against prior liens
• Limited permitted encumbrances

Below items are often seen in various financings depending on credit strength and market conditions

• Debt service reserve fund
  • Would one be funded with bond proceeds or equity
  • If it is a springing funding requirement, what is the trigger
  • How is the reserve requirement sized
  • Is a surety or letter of credit permitted in lieu of a cash deposit
  • Are there circumstances where all moneys in the reserve may be released
• Debt service coverage requirement
  • Maximum annual debt service or annual debt service to be covered; what is the required ratio; how low can it be before default?
  • Is a Consultant review required if the ratio falls below a threshold?
  • Steps and timing before event of default
• Additional debt limitation
• Disposition of cash and property limitations
• Cash or liquidity requirements
• Debt to capitalization requirement
• Security interest in designated property
• Mortgage or deed of trust
• Other