Step-ups/Step-downs | Practical Law

Step-ups/Step-downs | Practical Law

Step-ups/Step-downs

Step-ups/Step-downs

Practical Law Glossary Item 8-382-3840 (Approx. 2 pages)

Glossary

Step-ups/Step-downs

In the context of bank loan facilities, the terms refer to an increase or decrease in a covenant level (or other requirement) based on some agreed index. For example, a loan agreement may require the borrower to prepay the loans with 50% of its excess cash flow, but that percentage may "step-down" to 25% if the leverage ratio is less than 3.0:1.0.