AFP
CTP · Question #362
(Topic 4) XYZ Holdco has multiple credit facilities with a bank under a borrowing agreement that includes certain covenants. A fire has destroyed the manufacturing plant owned by ABC, one of the XYZ…
The correct answer is C. Material adverse change. See the full explanation below for the reasoning.
Question
- (Topic 4)
XYZ Holdco has multiple credit facilities with a bank under a borrowing agreement that includes certain covenants. A fire has destroyed the manufacturing plant owned by ABC, one of the XYZ subsidiaries that is part of the credit facilities. All loans, including the ABC loan, are up to date and being repaid as required. However, after the fire, the bank notified XYZ that it was in default. Which one of the following covenants is MOST LIKELY a term of the borrowing agreement?
Options
- ATechnical default
- BCross-default provisions
- CMaterial adverse change
- DTotal liabilities to assets ratio default
How the community answered
(59 responses)- A10% (6)
- B3% (2)
- C81% (48)
- D5% (3)
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