margin ratchet


margin ratchet
In a management buyout loan facility or under certain loan facilities it is common for a margin ratchet to be included.
The margin ratchet is a mechanism whereby the initial margin is reduced as and when the group achieves a better financial position, determined by reference to certain key financial ratios though, if that financial position subsequently worsens (and particularly on an event or potential event of default), the margin will return to its original level.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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