Leverage ratio clause: Copy, customize, and use instantly
Introduction
A leverage ratio clause outlines the ratio of a company’s debt to its equity or assets. It helps define the acceptable level of debt relative to equity or assets within an agreement, and it is often used in loan or credit agreements to ensure the borrower maintains a certain financial stability. The clause sets limits on the amount of leverage a company can carry, protecting lenders from excessive risk.
Below are templates for leverage ratio clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard leverage ratio clause
This variation applies to a general leverage ratio requirement.
[Party Name] agrees that the ratio of its total debt to equity shall not exceed [X]:1 at any time during the term of this agreement. If the leverage ratio exceeds this threshold, [Party Name] shall take corrective actions to reduce its debt or increase its equity, as necessary, to maintain compliance.
Leverage ratio with annual review clause
This variation applies when the leverage ratio is reviewed annually.
[Party Name] agrees to maintain a leverage ratio not exceeding [X]:1. This ratio will be reviewed on an annual basis and adjustments will be made if necessary to ensure that the leverage ratio remains within the agreed limits throughout the term of the agreement.
Leverage ratio with financial covenant clause
This variation applies when the leverage ratio is tied to a financial covenant.
[Party Name] agrees to maintain a leverage ratio of no more than [X]:1, as calculated by dividing total debt by EBITDA. A breach of this financial covenant will constitute an event of default, and [Party Name] will have [X] days to remedy the breach by taking appropriate corrective measures.
Leverage ratio with debt service coverage clause
This variation applies when the leverage ratio is tied to a debt service coverage ratio.
[Party Name] agrees that its leverage ratio, as measured by total debt to EBITDA, shall not exceed [X]:1. Furthermore, the debt service coverage ratio must not fall below [Y]:1, ensuring that [Party Name] has sufficient cash flow to service its debt obligations.
Leverage ratio with equity increase clause
This variation applies when the leverage ratio is controlled by increasing equity.
In the event that [Party Name]’s leverage ratio exceeds [X]:1, [Party Name] agrees to raise additional equity capital within [X] months to reduce the ratio to a level compliant with the covenant. Failure to do so may result in penalties or trigger an event of default.
Leverage ratio with specific asset exclusions clause
This variation applies when the leverage ratio excludes certain assets.
The calculation of the leverage ratio will exclude [specified assets, e.g., goodwill, intangible assets, etc.], which will not be considered in the total asset value when determining total debt to equity ratio. The maximum allowable leverage ratio will be [X]:1, calculated with these exclusions in place.
Leverage ratio with default triggers clause
This variation applies when the leverage ratio acts as a trigger for default.
If [Party Name]’s leverage ratio exceeds [X]:1 at any time during the agreement, this will constitute a breach of the agreement and trigger an event of default. [Party Name] will have [X] days to remedy the situation by reducing debt or increasing equity to bring the ratio within the acceptable limits.
Leverage ratio with refinancing requirement clause
This variation applies when the leverage ratio breach requires refinancing.
In the event that [Party Name]’s leverage ratio exceeds [X]:1, [Party Name] agrees to promptly seek refinancing to reduce the ratio to within the agreed limits. Failure to do so within [X] days may result in acceleration of loan repayment or other remedies as outlined in the agreement.
Leverage ratio with interim reporting clause
This variation applies when interim reporting of the leverage ratio is required.
[Party Name] agrees to provide interim reports on its leverage ratio every [X] months during the term of this agreement. The reports will include detailed calculations and an explanation of any significant fluctuations that may affect the ratio.
Leverage ratio with permitted exceptions clause
This variation applies when exceptions to the leverage ratio are permitted.
[Party Name] may temporarily exceed the leverage ratio limit of [X]:1 under specific conditions, including but not limited to, acquisitions or capital expenditures exceeding [$X]. Any such exceptions must be approved in writing by [lender/other party] and will not exceed [X]% of the total debt.
Leverage ratio with threshold increase clause
This variation applies when the leverage ratio threshold can be adjusted.
[Party Name] and [other party] agree to a leverage ratio threshold of [X]:1, which can be increased to [Y]:1 upon mutual agreement if market conditions or business operations require it. Any increase in the leverage ratio limit will be subject to a formal amendment of the agreement.
Leverage ratio with debt-to-assets ratio clause
This variation applies when the leverage ratio is calculated using debt-to-assets.
[Party Name] agrees that its debt-to-assets ratio shall not exceed [X]:1, where total debt is the sum of short-term and long-term liabilities, and total assets are calculated as the total value of tangible assets. This ratio will be monitored quarterly, and any breach will require immediate action to restore compliance.
Leverage ratio with project-specific clause
This variation applies when the leverage ratio is calculated for a specific project.
For the duration of the [specific project], [Party Name] agrees to maintain a leverage ratio not exceeding [X]:1. The leverage ratio will be calculated based on project-related debt and assets, and any excess will result in a review of the project’s financing structure.
Leverage ratio with net debt definition clause
This variation applies when net debt is defined for the leverage ratio calculation.
For the purposes of calculating the leverage ratio, "net debt" will be defined as total debt minus cash and cash equivalents. [Party Name] agrees that the net debt-to-equity ratio shall not exceed [X]:1 at any point during the term of this agreement.
Leverage ratio with no further borrowings clause
This variation applies when the leverage ratio limits further borrowings.
[Party Name] agrees that, if its leverage ratio exceeds [X]:1, it will not be permitted to borrow any additional funds until the ratio is brought back into compliance. This restriction applies to both short-term and long-term borrowings, including lines of credit and loans.
Leverage ratio with asset sales clause
This variation applies when asset sales impact the leverage ratio.
[Party Name] agrees that any sale of assets that reduces the total asset base by more than [X]% will result in a recalculation of the leverage ratio. If the ratio exceeds [X]:1 after the asset sale, [Party Name] will take immediate steps to reduce debt to bring the ratio within the acceptable range.
Leverage ratio with financial restructuring clause
This variation applies when financial restructuring is necessary due to leverage ratio breach.
If [Party Name]’s leverage ratio exceeds [X]:1, [Party Name] agrees to initiate a financial restructuring plan to reduce debt levels, including but not limited to refinancing, debt repayment, or asset sales, and to submit the plan to [other party] for approval within [X] days.
Leverage ratio with performance-based adjustments clause
This variation applies when the leverage ratio can be adjusted based on performance.
[Party Name] agrees that the leverage ratio may be adjusted based on performance metrics such as revenue growth, EBITDA, or profitability. If performance exceeds expectations, the leverage ratio limit may be increased by [X]% to allow for additional flexibility in financing.
Leverage ratio with operational cash flow clause
This variation applies when the leverage ratio is adjusted based on operational cash flow.
[Party Name] agrees that its leverage ratio will be adjusted based on its operational cash flow. If operational cash flow exceeds a certain threshold, the leverage ratio limit may increase to accommodate additional borrowing, subject to [Party Name] meeting specific cash flow targets.
Leverage ratio with incremental borrowing clause
This variation applies when the leverage ratio allows incremental borrowing based on performance.
[Party Name] may borrow incrementally up to a total leverage ratio of [X]:1, provided that its debt is serviced by operational cash flow. If cash flow decreases, [Party Name] will reduce its borrowing to maintain compliance with the leverage ratio.
Leverage ratio with contingent liabilities clause
This variation applies when contingent liabilities are considered in the leverage ratio calculation.
[Party Name] agrees that contingent liabilities, including guarantees and off-balance sheet obligations, will be included in the leverage ratio calculation. The ratio will be recalculated quarterly to ensure it remains within the agreed threshold of [X]:1.
Leverage ratio with covenant breach consequences clause
This variation applies when a breach of the leverage ratio covenant results in penalties.
If [Party Name] breaches the leverage ratio covenant by exceeding the limit of [X]:1, it will incur a penalty fee of [Y]% of the outstanding loan balance. The penalty will apply until the leverage ratio is brought back into compliance.
Leverage ratio with early repayment clause
This variation applies when the leverage ratio requires early repayment if exceeded.
In the event that [Party Name]’s leverage ratio exceeds [X]:1, [Party Name] agrees to make an early repayment of [Y]% of the outstanding loan balance. Early repayment will be made within [X] days from the breach notification to reduce the ratio to acceptable levels.
Leverage ratio with strategic investment threshold clause
This variation applies when leverage ratio thresholds allow for strategic investments.
[Party Name] agrees that, if its leverage ratio is below [X]:1, it may make strategic investments in high-growth opportunities without breaching the leverage ratio covenant. Investments exceeding [$X] must be approved by [lender/other party] and will require a recalculation of the leverage ratio.
Leverage ratio with refinancing option clause
This variation applies when refinancing is allowed to address leverage ratio breaches.
[Party Name] agrees that in the event of a leverage ratio breach, it may refinance its debt to bring the ratio into compliance. The refinancing terms will be subject to approval by [lender/other party], and the new financing structure must reduce the leverage ratio to no more than [X]:1.
Leverage ratio with future borrowing clause
This variation applies when the leverage ratio affects future borrowing capacity.
[Party Name] agrees that, if its leverage ratio exceeds [X]:1, it will be prohibited from seeking additional borrowing or taking on new debt until the ratio is reduced to a level compliant with the covenant. This includes any new loans, lines of credit, or debt issuance.
Leverage ratio with specific debt exclusions clause
This variation applies when specific debts are excluded from the leverage ratio calculation.
[Party Name] agrees that certain debts, including [specify types of debt, e.g., subordinated debt or debt incurred for acquisitions], will be excluded from the calculation of the leverage ratio. The leverage ratio, therefore, will only be calculated using senior debt and will not exceed [X]:1.
Leverage ratio with minimum equity requirement clause
This variation applies when a minimum equity requirement is tied to the leverage ratio.
[Party Name] agrees to maintain a minimum equity threshold of [$X]. If the leverage ratio exceeds [X]:1, [Party Name] will be required to increase its equity by issuing additional shares or other equity instruments to reduce the ratio to within compliance.
Leverage ratio with seasonal adjustments clause
This variation applies when the leverage ratio allows for seasonal fluctuations.
[Party Name] agrees that the leverage ratio may temporarily exceed the agreed limit of [X]:1 during specific seasonal periods of the year, subject to an adjustment period of up to [X] months. During this period, [Party Name] will take necessary actions to reduce the ratio before the end of the season.
Leverage ratio with quarterly monitoring clause
This variation applies when quarterly monitoring of the leverage ratio is required.
[Party Name] agrees to provide quarterly reports detailing its leverage ratio. These reports will be submitted to [other party] within [X] days of each fiscal quarter’s close and must reflect the total debt-to-equity ratio at the time of submission. Non-compliance with the ratio limit will be addressed promptly.
Leverage ratio with threshold increase based on growth clause
This variation applies when the leverage ratio can be increased based on business growth.
[Party Name] agrees that its leverage ratio may increase to [X]:1 if the company achieves a growth rate of at least [X]% in revenue or EBITDA over a [X]-month period. The ratio limit increase will be subject to review and approval by [lender/other party].
Leverage ratio with principal reduction requirement clause
This variation applies when the leverage ratio breach requires principal reduction.
[Party Name] agrees that if its leverage ratio exceeds [X]:1, it will be required to reduce the principal amount of outstanding debt by at least [Y]% within [X] months to restore compliance with the ratio covenant.
Leverage ratio with asset-backed borrowing clause
This variation applies when borrowing is secured by assets.
[Party Name] agrees that its leverage ratio, as calculated with respect to asset-backed borrowing, will not exceed [X]:1. The calculation will consider only secured debt backed by assets, and any excess leverage will require adjustments in the borrowing base.
Leverage ratio with periodic recalculation clause
This variation applies when the leverage ratio is recalculated periodically.
[Party Name] agrees to recalculate its leverage ratio on a [monthly/quarterly] basis, ensuring that it does not exceed the agreed-upon limit of [X]:1. If the recalculation reveals a breach, [Party Name] will immediately take steps to address the imbalance.
Leverage ratio with dividend restriction clause
This variation applies when the leverage ratio impacts dividend payments.
[Party Name] agrees that if its leverage ratio exceeds [X]:1, it will not declare or pay any dividends to shareholders until the ratio is reduced to a level that meets the covenant limit. Any dividend payments will require prior approval by [lender/other party].
Leverage ratio with early repayment of debt clause
This variation applies when early repayment is required due to a breach in leverage ratio.
[Party Name] agrees that, in the event its leverage ratio exceeds [X]:1, it will make early repayments of outstanding debt to reduce the ratio. The early repayment will be made within [X] days of the breach being identified.
Leverage ratio with short-term debt exclusion clause
This variation applies when short-term debt is excluded from the leverage ratio calculation.
For the purpose of calculating the leverage ratio, short-term debt, defined as debt with a maturity of [X] months or less, will not be included in the calculation. The leverage ratio shall only be calculated based on long-term debt exceeding [X] months.
Leverage ratio with performance-based exceptions clause
This variation applies when exceptions to the leverage ratio are granted based on performance.
[Party Name] agrees that if it exceeds the leverage ratio limit of [X]:1, exceptions may be granted based on exceeding certain performance metrics such as revenue growth, EBITDA increase, or cash flow improvements. These exceptions will be subject to review and approval by [lender/other party].
Leverage ratio with debt restructuring clause
This variation applies when debt restructuring is required due to a leverage ratio breach.
[Party Name] agrees to initiate a debt restructuring plan in the event its leverage ratio exceeds [X]:1. This restructuring plan will aim to reduce the overall debt burden and bring the ratio back within compliance. The plan will be submitted for approval within [X] days.
Leverage ratio with contingency allowance clause
This variation applies when a contingency allowance is made for the leverage ratio.
[Party Name] agrees that the leverage ratio may exceed the limit of [X]:1 by up to [Y]% in certain circumstances, such as acquisitions or capital expenditures. Any excess will be permitted for a period of up to [X] months, after which the ratio must be brought back into compliance.
Leverage ratio with penalty fees clause
This variation applies when penalty fees are charged for a breach of the leverage ratio.
If [Party Name] exceeds the leverage ratio of [X]:1, it agrees to pay a penalty fee of [X]% of the outstanding loan balance. This penalty fee will be due immediately upon breach of the leverage ratio covenant.
Leverage ratio with refinancing trigger clause
This variation applies when a refinancing trigger is set due to the leverage ratio.
If the leverage ratio exceeds [X]:1, [Party Name] agrees to trigger a refinancing option to reduce the debt burden. The refinancing will be done within [X] months of the breach, subject to terms agreed upon by [lender/other party].
Leverage ratio with temporary breach clause
This variation applies when a temporary breach of the leverage ratio is allowed.
[Party Name] agrees that the leverage ratio may temporarily exceed [X]:1 during periods of significant investment or restructuring, provided that it returns to compliance within [X] months. Any breach will be documented and followed by a corrective action plan.
Leverage ratio with calculation method clause
This variation applies when the method of calculating the leverage ratio is specified.
The leverage ratio will be calculated as total debt divided by [Party Name]’s EBITDA, with the resulting ratio not exceeding [X]:1. Any adjustments or exceptions to the calculation method must be approved by [lender/other party] in writing.
Leverage ratio with monitoring thresholds clause
This variation applies when leverage ratio thresholds trigger specific monitoring actions.
[Party Name] agrees that if its leverage ratio exceeds [X]:1, it will be subject to enhanced monitoring by [lender/other party], including quarterly reviews and additional reporting requirements. This monitoring will be conducted to ensure corrective measures are being taken to reduce the ratio.
Leverage ratio with asset-backed lending clause
This variation applies when leverage is calculated based on asset-backed lending.
[Party Name] agrees that its leverage ratio will be calculated based on asset-backed lending, where the ratio of secured debt to total assets shall not exceed [X]:1. This ratio will be monitored regularly to ensure that [Party Name] does not exceed the debt limits specified.
Leverage ratio with strategic acquisition clause
This variation applies when a strategic acquisition triggers a revision in the leverage ratio.
[Party Name] agrees that, for any strategic acquisition made during the term of this agreement, the leverage ratio may be adjusted temporarily to accommodate increased debt levels. The adjusted ratio will be reviewed and must be brought back into compliance within [X] months of the acquisition.
Leverage ratio with additional equity contribution clause
This variation applies when additional equity contributions are required due to leverage ratio breaches.
If [Party Name]’s leverage ratio exceeds [X]:1, it agrees to seek additional equity contributions from shareholders or investors to reduce the ratio. The equity contributions will be made within [X] days of the breach notification.
Leverage ratio with debt maturity scheduling clause
This variation applies when the leverage ratio affects debt maturity scheduling.
[Party Name] agrees that if its leverage ratio exceeds [X]:1, it will adjust its debt maturity schedule to reduce short-term debt obligations and extend the maturity of long-term debt. This restructuring will be completed within [X] months to ensure compliance with the leverage ratio covenant.
Leverage ratio with cash flow adjustment clause
This variation applies when cash flow is used to adjust the leverage ratio.
[Party Name] agrees to adjust its leverage ratio based on operational cash flow. If cash flow falls below [X] for any given period, [Party Name] will reduce its total debt within [X] months to restore the ratio to the agreed-upon level of [X]:1.
Leverage ratio with temporary excess clause
This variation applies when temporary excess of the leverage ratio is allowed.
[Party Name] may exceed the agreed-upon leverage ratio of [X]:1 temporarily during periods of major capital expenditure, provided that the excess does not exceed [X]% of the total debt. This temporary excess must be reduced within [X] months, at which point the ratio must return to compliance.
Leverage ratio with debt refinancing clause
This variation applies when debt refinancing is triggered by a breach in the leverage ratio.
In the event that [Party Name] exceeds the leverage ratio of [X]:1, [Party Name] agrees to initiate a refinancing of its debt to reduce the leverage ratio. The refinancing will be completed within [X] months to bring the ratio back within the agreed-upon limits.
Leverage ratio with equity buyback clause
This variation applies when equity buybacks are used to manage the leverage ratio.
If [Party Name]'s leverage ratio exceeds [X]:1, [Party Name] agrees to use its surplus cash flow to repurchase equity from shareholders. This equity buyback will be used to reduce the overall debt-to-equity ratio to meet the agreed-upon threshold.
Leverage ratio with dividend restriction clause
This variation applies when the leverage ratio exceeds a certain threshold, restricting dividend payments.
[Party Name] agrees that if its leverage ratio exceeds [X]:1, no dividends will be paid to shareholders until the ratio is reduced below the agreed limit. The restriction on dividends will remain in effect until [Party Name] achieves a leverage ratio within the acceptable range.
Leverage ratio with conditional breach remedy clause
This variation applies when a breach of the leverage ratio can be remedied by specific conditions.
If [Party Name] breaches the leverage ratio limit of [X]:1, [Party Name] agrees to remedy the breach by increasing its equity through the issuance of new shares or reducing its debt by [X]% within [X] months. Failure to do so will trigger penalties as defined in this agreement.
Leverage ratio with ongoing reporting clause
This variation applies when ongoing reporting of the leverage ratio is required.
[Party Name] agrees to provide quarterly reports detailing its leverage ratio, calculated as total debt divided by equity. These reports must be submitted to [other party] within [X] days of the end of each quarter to ensure compliance with the terms of this agreement.
Leverage ratio with capped borrowing clause
This variation applies when borrowing is capped based on the leverage ratio.
[Party Name] agrees that any new borrowings, whether through loans or lines of credit, will be capped at an amount that ensures the leverage ratio does not exceed [X]:1. If borrowings exceed the cap, [Party Name] will be required to take corrective action to reduce the debt.
Leverage ratio with exception for extraordinary events clause
This variation applies when extraordinary events allow for a temporary increase in the leverage ratio.
[Party Name] agrees that in the event of an extraordinary event, such as an acquisition, major capital expenditure, or market crisis, the leverage ratio may temporarily exceed [X]:1. Any such increase must be approved by [other party] and will be limited to [X]% above the threshold for no more than [X] months.
Leverage ratio with non-debt liabilities clause
This variation applies when non-debt liabilities are excluded from the leverage ratio calculation.
[Party Name] agrees that non-debt liabilities, such as pension obligations and contingent liabilities, will not be considered in the calculation of the leverage ratio. The ratio will only account for financial debt obligations relative to equity.
Leverage ratio with fixed debt schedule clause
This variation applies when the debt schedule is fixed to maintain the leverage ratio.
[Party Name] agrees to adhere to a fixed debt repayment schedule, which will ensure that the leverage ratio remains at or below [X]:1 throughout the term of this agreement. Any deviation from the schedule will require approval by [lender/other party].
Leverage ratio with threshold for refinancing clause
This variation applies when the leverage ratio breach triggers refinancing requirements.
If [Party Name]’s leverage ratio exceeds [X]:1, [Party Name] agrees to initiate refinancing options, including negotiating new loan terms or restructuring existing debt to bring the leverage ratio back within the agreed-upon limits. The refinancing plan must be submitted for approval within [X] days.
Leverage ratio with acquisition-related adjustment clause
This variation applies when an acquisition is considered in the leverage ratio calculation.
In the event of an acquisition, the leverage ratio may be adjusted to account for the new debt incurred to finance the acquisition. The adjusted leverage ratio must be calculated within [X] days of the acquisition closing and brought into compliance within [X] months.
Leverage ratio with covenant breach remediation clause
This variation applies when a covenant breach must be remedied.
If the leverage ratio exceeds [X]:1, [Party Name] agrees to take immediate steps to remedy the breach, including reducing outstanding debt by [X]% or raising additional equity. The remediation plan must be approved by [lender/other party] within [X] days of the breach.
Leverage ratio with adjustment for asset revaluation clause
This variation applies when asset revaluation impacts the leverage ratio.
If [Party Name] revalues any of its assets, the leverage ratio will be recalculated based on the updated asset values. Any increase in the asset base due to revaluation will allow for a proportional increase in the leverage ratio, subject to the limit of [X]:1.
Leverage ratio with contingency reserve clause
This variation applies when a contingency reserve impacts the leverage ratio.
[Party Name] agrees to maintain a contingency reserve fund, which will be used to cover unforeseen expenses or liabilities. If the leverage ratio exceeds [X]:1, the contingency reserve may be used to offset liabilities temporarily and reduce the ratio, subject to approval by [lender/other party].
Leverage ratio with strategic financial support clause
This variation applies when financial support is provided to manage the leverage ratio.
In the event that [Party Name]’s leverage ratio exceeds [X]:1, [Party Name] may seek strategic financial support from [investors/other party] to either raise equity or obtain favorable debt restructuring terms. The terms of such financial support will be subject to review and approval by [lender/other party].
Leverage ratio with cash flow-based covenant clause
This variation applies when the leverage ratio is determined based on cash flow metrics.
[Party Name] agrees that the leverage ratio will be calculated by dividing total debt by cash flow, defined as EBITDA minus capital expenditures. The ratio shall not exceed [X]:1, and failure to meet this requirement will trigger a review of [Party Name]’s financial stability.
Leverage ratio with adjustment for seasonality clause
This variation applies when seasonality is considered in the leverage ratio calculation.
[Party Name] agrees that the leverage ratio may be adjusted during seasonal fluctuations in business. If business activities or revenues are significantly lower than expected, the leverage ratio may temporarily exceed [X]:1, provided that [Party Name] presents a plan to return the ratio to compliance within [X] months.
Leverage ratio with senior debt consideration clause
This variation applies when senior debt is prioritized in the leverage ratio.
The leverage ratio will be calculated using only senior debt relative to total equity, excluding subordinated debt and other liabilities. [Party Name] agrees to maintain the ratio of senior debt to equity at or below [X]:1, and any excess debt will be subject to the approval of [lender/other party].
Leverage ratio with limited debt issuance clause
This variation applies when a limit is placed on new debt issuance based on the leverage ratio.
[Party Name] agrees that it will not issue new debt if its leverage ratio exceeds [X]:1. Any new debt issuance will require approval from [lender/other party] and will only be permitted if the ratio is reduced to [X]:1 or below within [X] months of issuance.
Leverage ratio with early debt retirement clause
This variation applies when early debt retirement is required if the leverage ratio exceeds a certain threshold.
If the leverage ratio exceeds [X]:1, [Party Name] agrees to initiate an early retirement of outstanding debt to bring the ratio within compliance. The early retirement process will begin within [X] days of the breach and will be completed within [X] months.
Leverage ratio with gradual reduction clause
This variation applies when a gradual reduction of debt is required to improve the leverage ratio.
If the leverage ratio exceeds [X]:1, [Party Name] agrees to reduce its debt by [X]% per quarter for the following [X] quarters until the leverage ratio is brought within the agreed threshold of [X]:1.
Leverage ratio with accelerated repayment clause
This variation applies when the leverage ratio triggers accelerated repayment of debt.
If [Party Name]’s leverage ratio exceeds [X]:1, [Party Name] agrees to accelerate the repayment of debt, making an additional payment of [X]% of the total debt within [X] days of the breach to reduce the ratio and bring it back into compliance.
Leverage ratio with subordinated debt inclusion clause
This variation applies when subordinated debt is included in the leverage ratio calculation.
[Party Name] agrees to include all subordinated debt in the calculation of its leverage ratio. The ratio will not exceed [X]:1, and any subordinated debt exceeding the limit must be restructured or repaid within [X] months to ensure compliance.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.