Credit Agreements vs Indentures
Chapters in this video
- 0:00 The two debt paths: credit agreements versus indentures
- 1:04 Active agent versus passive trustee: the single most-tested distinction
- 2:59 Amortizing repayment versus bullet repayment and maturity walls
- 3:39 Mandatory prepayments are not events of default
- 4:20 The Trust Indenture Act of 1939 and the $10 million threshold
- 5:24 Restructuring: ad hoc bondholder committees lead workouts, not the trustee
- 6:41 Why indenture amendments take 30-60 days and what exit consents are
- 7:38 Rapid-fire exam recap
What this video covers
- Why the administrative agent is active and the trustee is passive, and which tasks each representative actually performs
- How maintenance covenants differ from incurrence covenants, and which document type uses each style
- What bullet repayment means versus amortizing repayment, and why a maturity wall concentrates refinancing risk
- Why a mandatory prepayment, such as an excess cash flow sweep, is a normal covenant mechanic, but failing to make it triggers an event of default
- When the Trust Indenture Act of 1939 applies ($10 million threshold for public debt) and why it does not cover private bank loans or private placements
- Why bond indentures are harder and slower to amend than credit agreements, and what role exit consents play
- How an ad hoc committee of bondholders, not the trustee, leads workout negotiations when a public issuer defaults
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