Equity Cure

Definition:

A provision in Credit Agreements that allows the shareholders of a borrower to provide cash to the borrower in exchange for equity in the borrower company so that the borrower can avoid breaching the Financial Covenants in a Credit Agreement. Lenders are hesitant to agree to an Equity Cure provision because its exercise is potentially a sign of the borrower’s poor financial health, and it may delay the lender’s recovery of the debt if the borrower were to breach the Financial Covenants.

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