Leverage Restrictions Sample Clauses
Leverage Restrictions. From and after the date a General Partner Fundamental Change is consummated, so long as any Series A Preferred Units are thereafter outstanding:
(1) The Partnership shall not incur additional Indebtedness if its Leverage Ratio exceeds 50% (the “50% Leverage Ratio”).
(2) The Partnership’s Leverage Ratio shall not exceed 60% at any time; provided, however, that if the Partnership’s Leverage Ratio exceeds 60%, it shall have a period of 180 days to cause its Leverage Ratio to fall below 60%.
(3) Notwithstanding the foregoing, (i) in the event of any redemption or conversion of any Series A Preferred Units pursuant to Sections 16.5 or 16.6 of this Agreement, whether such redemption or conversion occurs before or after the consummation of the General Partner Fundamental Change pursuant to which this Section 16.8.C becomes effective, the Partnership shall have the right to increase its Indebtedness by an amount equal to the amount by which the aggregate Series A Preference has been reduced relative to the amount thereof as of the original issuance date of the Series A Preferred Units, so long as the Adjusted Leverage Ratio does not, as a result of such incurrence of Indebtedness, exceed 83%, and (ii) the Partnership shall have the right to increase its Indebtedness above the 50% Leverage Ratio to the extent, and only to the extent, necessary to satisfy the Partnership’s obligations to provide opportunities to Series A Limited Partners to guaranty Partnership Indebtedness or otherwise provide debt protection pursuant to agreements between the Partnership and the various Series A Limited Partners (but only if such obligation is not able to be satisfied through guaranties of the Partnership’s Indebtedness that would not require the Partnership to increase its Indebtedness above the amount that would violate the 50% Leverage Ratio).
(4) As used in this Article 16, (i) “Leverage Ratio” means the ratio of the sum of the total Indebtedness of the Partnership and its consolidated Subsidiaries to the Partnership’s and its consolidated Subsidiaries’ Gross Asset Value, (ii) “Adjusted Leverage Ratio” means the ratio of (x) the sum of the total Indebtedness of the Partnership and its consolidated Subsidiaries plus the Series A Preference with respect to all of the then-outstanding Series A Preferred Units to (y) the Partnership’s and its consolidated Subsidiaries’ Gross Asset Value, and (iii) “Maximum Leverage Restriction” means the restrictions on the Partnership’s Leverage ...
Leverage Restrictions. As mentioned by the Committee of Federal Regulations of Securities in 2010, leverage that is embedded in many derivatives, has presented issues concerning how US funds should appropriately use derivatives, how they should disclose the related risks, and how the positions should be treated under applicable law.87 Investors may understand the risks associated with an investment in a fund that uses leverage. As a result, regulatory authorities, including the SEC, focus on restricting the use of leverage by funds offered to retail investors and imposing disclosure obligations on funds to make investors aware of the risks involved in funds that expose their portfolio to signifi- cantly high levels of leverage.88 The 1940 Act imposes certain leverage restrictions on registered funds. Article 18(f)(1) of the 1940 Act prohibits open-end funds from issuing or selling so-called senior securities and provides that they may only borrow from US banks subject to a 300% asset coverage requirement (including the amount borrowed), i.e., direct leverage is allowed up to 33.33% of a fund’s total net assets,89 at all times that the borrowing is outstanding. Senior securities are defined in Article 18(g) of the 1940 Act as ‘any bond, debenture, note or similar obligation or instruments constituting a security and evidencing indebtedness, and any stock of a class having priority over any other class as to distribution of assets or payment of dividends’. Closed-end registered funds are subject to less restrictive provisions as they may issue or incur debt under Article 18(a), (c) and (e) of the 1940 Act: (1) through issuance of a single class of debt, so long as the fund maintains an asset coverage ratio of at least 300% and the debt is subject to specified restrictive covenants, (2) through issuance of one class of senior (‘preferred’) stock, so long as the fund maintains an asset coverage ratio of at least 200% and the preferred stock is subject to specified restrictive covenants, (3) by borrowings from a US bank or through a privately arranged financing, (4) for the purpose of refunding or a plan of reorganization subject to certain requirements. Both open-end and closed-end funds are allowed to issue temporary, short-term loans of up to 5% of the fund’s total assets with any person. A loan is presumed to be for temporary purposes if it is repaid within sixty days and is not extended or renewed.90
Leverage Restrictions. Leverage has been defined in this book (see section 2.6.6[C]) as including both the borrowing of money and the use of derivatives by fund managers. While highly leveraged funds might create systemic risk, they also form a risk to investors as it increases the risk level of their investment (as well as their potential return). The question can therefore be raised whether funds that use leverage are suitable to retail investors. With respect to the retail-orientated UCITS, the UCITS Directive requires that UCITS cannot have a global exposure greater than its NAV. Thus, there is a hard limit to a UCITS’ leverage of 100% of the NAV. In addition, the risk exposure of a UCITS may not be increased by more than 10% by means of temporarily borrowing. Consequently, the overall risk exposure of a UCITS may not exceed 210% of the NAV under any circumstances. See with respect to the risk exposure of UCITS also section 3.2.2. Furthermore, the use of derivatives by UCITS is limited by the UCITS Directive. As discussed in section 3.2.1, UCITS may also invest in derivatives in case the underlying instrument of the derivative consists of eligible instruments covered by the directive, financial indices, interest rates, foreign exchange rates or currencies. OTC derivatives may be invested in case the counterparties to the transactions are subject to prudential supervision and valuation of the derivative is reliable and verifiable and can be sold at any time at their fair value. Short-selling is not allowed under the directive. An UCITS must provide specific disclosures in the prospectus in relation to the use of 207. For example, only for non-complex (‘traditional’) UCITS. At any case, Article 14(a)(4) of the UCITS Directive provides that guidelines issued by ESMA shall take into account ‘the principles on sound remuneration policies set out in Commission Recommendation 2009/384/EC, the size of the management company and the size of UCITS they manage, their internal organisa- tion and the nature, the scope and the complexity of their activities’.
Leverage Restrictions. Notwithstanding the provisions of Section 5.6 hereof, incur, create, assume or permit to exist at any time any Debt, except to the extent that the ratio of (a) Consolidated Debt, including the Notes to (b) the sum of Consolidated Tangible Net Worth plus Consolidated Debt does not, at any time exceed:
(i) for the period from and after the date of closing through and including July 26, 1997, 50%;
(ii) for the period from and after July 27, 1997 through and including July 31, 1999, 47.5%; and
(iii) at all times from and after August 1, 1999, 45%.