DSC COVENANT Clause Samples
A DSC Covenant is a contractual provision that requires a borrower to maintain a minimum Debt Service Coverage (DSC) ratio, ensuring that the borrower's operating income is sufficient to cover its debt obligations. In practice, this clause typically mandates regular financial reporting and may trigger default or remedial actions if the DSC ratio falls below a specified threshold. The core function of a DSC Covenant is to protect lenders by monitoring the borrower's financial health and reducing the risk of non-payment.
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DSC COVENANT. The Debt Service Coverage for each Calculation Period determined on each Calculation Date shall be not less than 1.
20:1. If such Debt Service Coverage covenant shall not be satisfied on any Calculation Date, Borrower shall prepay a sufficient amount of principal outstanding on the Loan such that if such principal reduction had been made on the first day of the Calculation Period the Debt Service Coverage covenant would have been satisfied. It shall be an Event of Default if Borrower fails to make such a prepayment not later than the first to occur of: (i) ten (10) Business Days after notice from Administrative Agent to Borrower properly requesting the payment, or (ii) if Borrower has failed to give Administrative Agent and each of the Lenders sufficient reports to enable Administrative Agent to make the necessary calculations, forty-five (45) days following the applicable Calculation Date.
DSC COVENANT. The Debt Service Coverage for each Calculation Period shall be not less than 1.25:1 during the Initial Term of the Loan and 1.40:1 during the Extended Term. If such Debt Service Coverage covenant shall not be satisfied on any Calculation Date, Borrower shall (i) prepay a sufficient amount of principal outstanding on the Loan or (ii) provide the Lender with cash, cash equivalents or a letter of credit reasonably acceptable to Lender as additional collateral. Such additional collateral shall be in an amount which is sufficient if offset against the outstanding principal amount such that if such principal reduction had been made or additional collateral offset against the principal amount of the Loan on the first day of the Calculation Period the Debt Service Coverage covenant would have been satisfied. Any 28
DSC COVENANT. The Debt Service Coverage for each Calculation Period determined on each Calculation Date shall be not less than 1.5:1 (measured quarterly on a rolling four-quarter basis). If such Debt Service Coverage covenant shall not be satisfied on any Calculation Date, Borrower shall prepay a sufficient amount of principal outstanding on the Loan such that if such principal reduction had been made on the first day of the Calculation Period the Debt Service Coverage covenant would have been satisfied. It shall be an Event of Default if Borrower fails to make such a prepayment not later than the first to occur of: (i) thirty (30) days after notice from Lender to Borrower properly requesting the payment, or (ii) if Borrower has failed to give Lender sufficient reports to enable Lender to make the necessary calculations, forty-five (45) days following the applicable Calculation Date.