California Health Facilities Financing Authority

Sample Covenants/Security

Required

  • Unconditional promise to pay

Strongly Preferred

  • Gross Revenue or Gross Receivables pledge
  • Negative pledge against prior liens
  • Limited permitted encumbrances

Below items are often seen in various financings depending on credit strength and market conditions

  • Debt service reserve fund
    • Would one be funded with bond proceeds or equity
    • If it is a springing funding requirement, what is the trigger
    • How is the reserve requirement sized
    • Is a surety or letter of credit permitted in lieu of a cash deposit
    • Are there circumstances where all moneys in the reserve may be released
  • Debt service coverage requirement
    • Maximum annual debt service or annual debt service to be covered; what is the required ratio; how low can it be before default?
    • Is a Consultant review required if the ratio falls below a threshold?
    • Steps and timing before event of default
  • Additional debt limitation
  • Disposition of cash and property limitations
  • Cash or liquidity requirements
  • Debt to capitalization requirement
  • Security interest in designated property
  • Mortgage or deed of trust
  • Other