Ratio Covenant

Ratio Covenant

Any covenant in a loan agreement that uses a financial ratio. For example, a ratio covenant may prohibit more than a certain amount of leverage and may use a gearing ratio to determine this.
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In each of the three observations illustrated, the interest coverage ratio covenant is satisfied, but the margin by which it is met varies by more than 40% just between observations 1 and 2.
It will also maintain the loan-to-value ratio covenant at its current 40 percent level for the remaining term of the SSTL.
RCS Capital Corporation (NYSE: RCAP) said it has agreed with its first and second lien lenders under its existing credit facilities to certain leverage ratio covenant amendments in addition to other modifications.
Although PLUS Berhad is not required to maintain a DE ratio covenant, the company's leverage is deemed high for its standalone rating.
The facility also contains amendments to the covenant package including the suspension of the net debt to EBITDA ratio covenant until 1 July 2016 and changes to the balance sheet gearing covenants to make them more appropriate to the Group's projected financial profile through until the completion of Bozshakol.
The amendment is said to increase the flexibility under the total leverage ratio covenant, increase the interest rate payable with respect to outstanding loans under the facility by 1.
We also are pleased with the amendment in the leverage ratio covenant as it allows us greater flexibility to operate in the case of an extended low commodity price cycle.
The debt to capitalization ratio covenant will decrease the maximum permitted ratio to 40%, add an anti-cash hoarding covenant that limits the holding of proceeds from a borrowing as well as add a covenant that restricts the company's ability to pay dividends and make equity repurchases in certain circumstances.
However it did not reach its target interest to EBIT ratio covenant of 1.
Following the issuance of RVMTP Shares, total leverage is expected to range from 35% to 40%, but at all times will be limited by the fund's 45% effective leverage ratio covenant (see below).
Among other things, the amendment removes the maximum leverage ratio financial covenant and delays the implementation of an interest coverage ratio covenant until July 2018, added the company.
However, the ratings are constrained by limited growth potential in the domestic market which necessitates an increased reliance on foreign contracts to grow its sales, the lack of long-term earnings visibility due to the short-term nature of its contracts and its moderately high leverage position, albeit within its gearing ratio covenant of 1.