Future Local Debt Clause Samples
The 'Future Local Debt' clause defines how a party's future borrowing or incurrence of debt within a specific local jurisdiction is treated under the agreement. Typically, this clause sets out restrictions or conditions on the ability of a party—often a borrower or issuer—to take on additional local debt after the agreement is signed. For example, it may require the party to obtain consent before incurring new local loans or to maintain certain financial ratios. The core function of this clause is to protect the interests of the other party by limiting the risk of over-leverage or dilution of security, thereby ensuring the financial stability and predictability of the arrangement.
Future Local Debt. The applicant’s future debt may not be senior to CWSRF debt. The applicant’s future local debt may be on parity with the CWSRF debt if the following conditions are met:
(1) The applicant’s net revenues pledged to pay all senior debts relying on the pledged revenue source are at least 1.2 times the highest year’s debt service and net revenues pledged to pay all debts are at least 1.1 times the highest year’s debt service; and
(2) One of the following conditions is met:
(A) The Recipient’s proposed parity Additional Obligation is rated “A,” or higher, by at least two nationally recognized rating agencies; or
(B) The Recipient is a disadvantaged community and the Division determines that it would be economically burdensome for the agency to obtain nationally recognized ratings for its parity debt; or
(C) The Recipient is a disadvantaged community and the Division determines that requiring the proposed Additional Obligations to be subordinate to the Recipient’s Obligations hereunder will unduly restrict the Recipients from obtaining future system debt necessary for water quality improvements.
Future Local Debt. All future debt incurred by the Agency shall be on parity with, or subordinate to, the Obligation.