Cross-Default Clause

A contractual provision in acquisition agreements that allows the buyer to withdraw from or renegotiate a transaction if the target company experiences a significant negative event between signing and closing. MAC clauses define what constitutes a material change and typically exclude general market downturns, industry-wide conditions, and changes in law, focusing instead on company-specific deterioration.

The ratio of net operating income to total debt service obligations (principal plus interest payments) over a given period, measuring a borrower's ability to service its debt from operating cash flow. A DSCR above 1.0x indicates sufficient cash flow to meet debt payments, while lenders typically require a minimum DSCR of 1.2x to 1.5x as a loan covenant.

Debt that ranks below senior obligations in priority of repayment in the event of the borrower's liquidation or default. Subordinated debt holders are repaid only after senior secured and senior unsecured creditors have been satisfied in full.

A clause in a private equity or venture capital fund agreement that adjusts the distribution of carried interest at the end of the fund's life to ensure the general partner has not received more carry than entitled based on overall fund performance. Lookback provisions protect limited partners against early distributions that overstate returns.

Debt that holds the highest priority claim on specified collateral in the event of default or liquidation, ranking ahead of unsecured and subordinated obligations. Senior secured lenders benefit from security interests over identified assets such as property, equipment, receivables, or intellectual property.

A provision that gives minority shareholders the right to join a transaction when a majority shareholder sells their stake, ensuring they can exit on the same terms and conditions. Tag-along rights protect minority investors from being left in a company after a controlling interest changes hands.

A security interest over a specific, identified asset that prevents the borrower from dealing with or disposing of the charged asset without the lender's consent. Fixed charges attach to assets such as land, buildings, specific plant and equipment, or identified intellectual property rights.

The ratio of earnings before interest and taxes (EBIT) to interest expense, measuring a company's ability to meet its interest obligations from operating profits. A higher ratio indicates greater financial headroom and lower default risk.