Debunking Common Covenant Myths #5 –Applying Asset Sale Proceeds
In the final episode of our series on Debunking Common Covenant Myths, we clarify the wide flexibility that management has to apply asset sale proceeds. Some market participants believe that asset sale proceeds can only be applied to repay debt or reinvest in the business.
This is definitely not true!
Whilst it once was the case that asset sale application of proceeds provisions were fairly restrictive in order to preserve value and reduce debt, over time these provisions have become much more borrower-friendly.
As a result, asset sale proceeds can now be applied in the following additional ways:
- To make Restricted Payments
- To make Permitted Investments
- To service debt interest costs
Further, in some deals asset sale proceeds can serve to increase Restricted Payments capacity in a number of ways.
Fox Legal Training students are well aware of the myriad ways that asset sale proceeds can be used by borrowers in the modern vintage of deals – an expansion of flexibility that has serious implications for lenders.
To find out more about our on-demand, first-of-its-kind covenant education platform, get in touch at info@foxlegaltraining.com for a demo and to gain access to our taster course.