Mandatory Prepayment

Summary

Provisions in a Credit Agreement that obligate the Borrower to prepay all or part of the loans before the scheduled date of payment. Typical examples of scenarios where a Borrower would need to prepay the loan are asset sales (usually subject to Reinvestment Right), Excess Cash Flow with Stepdowns, incurrence of debt, equity issuance and casualty and condemnation proceeds. The percentage of the monies received from such events that needs to be paid to the Lenders is negotiated and may be subject to prepayment penalties.