Interest Coverage Test; Decrease of Permitted Leverage Ratio Sample Clauses
The Interest Coverage Test; Decrease of Permitted Leverage Ratio clause sets financial thresholds that a borrower must meet, specifically relating to the ratio of earnings to interest expenses and the maximum allowable debt relative to earnings. In practice, this clause requires the borrower to maintain a minimum interest coverage ratio, ensuring they generate enough income to cover interest payments, and may also mandate a gradual reduction in the permitted leverage ratio over time. Its core function is to protect lenders by ensuring the borrower's ongoing financial health and reducing the risk of default as the loan matures.
Interest Coverage Test; Decrease of Permitted Leverage Ratio. If the Borrower shall fail to maintain, for any two (2) consecutive fiscal quarters, determined as of the last day of each fiscal quarter of the Borrower, an Interest Coverage Ratio equaling or exceeding the then applicable Minimum Interest Coverage Ratio (the “Interest Coverage Test”), then the Permitted Leverage Ratio for the same fiscal quarter with respect to which the Borrower shall have so failed the Interest Coverage Test (i.e., the second of any such two (2) consecutive fiscal quarters, which quarter is herein referred to as the “Coverage Test Failure Quarter”), shall be decreased as follows: (i) if the Permitted Leverage Ratio for the fiscal quarter preceding such Coverage Test Failure Quarter was 60%, the Permitted Leverage Ratio shall be decreased by 5% to 55%; and (ii) if the Permitted Leverage Ratio for the fiscal quarter preceding such Coverage Test Failure Quarter was less than 60%, the Permitted Leverage Ratio shall be decreased by 2.5%.
Interest Coverage Test; Decrease of Permitted Leverage Ratio. If at any time at which the Permitted Leverage Ratio is 55% Borrower shall fail to maintain, for two (2) consecutive fiscal quarters, a ratio (the “Interest Coverage Ratio”), determined as of the last day of each fiscal quarter for the four-quarter period ending on such day, of (i) EBITDA for such period to (ii) Consolidated Interest Incurred for such period, of at least 2.00 to 1.0 (the “Interest Coverage Test”), then the Permitted Leverage Ratio for the same fiscal quarter with respect to which Borrower shall have so failed the Interest Coverage Test (i.e., the second of such two (2) consecutive fiscal quarters, which quarter is herein referred to as the “Coverage Test Failure Quarter”), shall be decreased to 50%. In no event shall the Permitted Leverage Ratio be less than 50%.