However, debt covenant
violations often occur simply because of the inability of the financial managers in an organization to plan properly.
Where a company is unable to borrow additional funds or issue new debt securities--whether because of concerns over the effect on credit ratings, debt covenant
restrictions, or regulatory requirements--and does not wish to dilute earnings per share by issuing additional common shares, a preferred share issuance is the only viable course.
Griffin and colleagues David Lont and Kate McClune of the University of Otago tracked insider stock transactions that occurred during or near 1,718 first-time disclosures of debt covenant
violations by U.
Previous research by the current authors examined individual debt covenants
to determine if identifiable patterns exist and if there is a significant difference in debt covenant
utilization among industry classifications.
The brief report 'Limited Debt Covenant
Protection for Motorola Bondholders in LBO' provides a detailed LBO scenario as well as additional analysis on Motorola's bond indentures.
COV = dummy variable set equal to one if the debt covenant
is included in debt contract, zero otherwise.
We started with a clean slate, and I was able to help negotiate the loan agreement; create a comprehensive financial package for board meetings; design financial models that generated, tracked and projected the company's financial statements, debt covenants
and liquidity; and design discounted cash flow models used for lease vs.
While AOL Time Warner executives have said debt covenants
would not be affected by the none-cash charge, accounting experts say such charges can hurta company's debt rating as well as its ability to borrow.
They also bore fraud in mind when debt covenants
were restrictive in a situation where income was better than expected.
The debt covenants
restricted the amount of debt (other than certain short-term debt) that the parent and subsidiary could incur to a certain percentage of the parent's net tangible assets.
37x, and additional debt covenants
are adequate as well.
Hollywood's decision to pursue equity financing is the result of both the general health of equity markets and its desire to avoid debt covenants
that might place constraints on future operations.