Asset Sale Covenant

Definition:

In an Indenture, the Covenant that governs the sale of assets. Assets may be sold by the company; however, it must get Fair Market Value and mostly cash. The proceeds must then be used to repay Senior Debt, invest in long-term assets for the business or make an offer to repurchase bonds at Par.

In a Credit Agreement, the Asset Sale Covenant is a strict restriction on the borrower’s ability to sell assets. See also Asset Sale Prepayment.

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