Available Amounts Basket

Definition:

An additional type of Basket that is used in a Credit Agreement or Indenture to ensure a degree of fiscal prudence on the part of the borrower or issuer and to further lessen the lender’s or bondholders’ risk. The Basket works to limit the amount available (usually with reference to consolidated net income) that a borrower can use for purposes other than repaying interest or principal on the debt, such as Capital Expenditure (CAPEX) and paying dividends. Often this amount is an aggregate of the various payments and/or distributions permitted under the Credit Agreement or Indenture.

In the context of high-yield bonds, baskets are the exceptions to restricted covenants and provide issuers flexibility to undertake corporate activities that would otherwise be prohibited, within defined parameters.

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