Available Amount Basket
An Available Amount Basket is a cumulative covenant basket that can permit investments, restricted payments or junior-debt payments using capacity generated from contractually specified sources such as a starter amount, retained net income, retained excess cash flow, equity contributions or investment returns.
The basket can accumulate with performance
Unlike a fixed basket, an Available Amount can grow as the company retains earnings, generates excess cash flow or receives qualifying equity contributions.
That lets covenant flexibility increase when the borrower creates additional economic value.
Different components can have different conditions
A starter amount may be usable with few conditions while the net-income or ECF component may require leverage compliance or absence of specified defaults.
The basket should therefore be separated by source rather than treated as one undifferentiated number.
Usage reduces future capacity
Investments, dividends and junior-debt payments made in reliance on the basket generally consume capacity.
Returns on investments or other defined proceeds can sometimes restore it, depending on the document.
Available Amount and grower baskets are different
A grower basket scales with a current financial measure. An Available Amount typically accumulates specified credits over time and tracks prior uses.
A single agreement can contain both.
Available Amount capacity can persist even after operating performance slows
A builder basket often accumulates credits from prior periods. Suppose a borrower starts with $100 million, earns another $80 million of usable cumulative capacity over two years and then uses $70 million.
Remaining capacity is $110 million.
If earnings weaken in year three, that previously built amount may still remain available unless the agreement imposes a new condition on its use. This differs from a pure grower basket, which can be tied more directly to current EBITDA.
The historical roll-forward therefore matters. A borrower with weak current results can still possess substantial distribution or investment flexibility because capacity was built when performance was stronger.
Common mistakes
Treating the basket as a fixed amount It can build or shrink.
Ignoring prior usage Historical transactions matter.
Assuming every component has identical conditions Leverage and default blockers can differ by source and use.
Example
A credit agreement starts with the greater of $175 million and 50% of EBITDA, then adds 50% of positive net income or retained excess cash flow. If the borrower uses $100 million for an investment, remaining capacity is reduced by that amount unless later earnings or other permitted sources rebuild it.
Example
A credit agreement starts with the greater of $175 million and 50% of EBITDA, then adds 50% of positive net income or retained excess cash flow. If the borrower uses $100 million for an investment, remaining capacity is reduced by that amount unless later earnings or other permitted sources rebuild it.
Professional note
Build a roll-forward schedule. Starting capacity, additions, prior usage, returns of capital, leverage tests and reclassification rights determine the real amount available on any date.
Related terms
- Excess Cash Flow Sweep
An excess cash flow sweep is a mandatory prepayment mechanism requiring a borrower to use a defined portion of Excess Cash Flow, calculated under the credit agreement, to repay term loans.
- Restricted Payments Basket
A restricted payments basket is contractual capacity within a credit agreement or indenture that permits a borrower or restricted subsidiary to make specified dividends, distributions, equity repurchases or other restricted payments despite a broader negative covenant limiting those actions.
- Grower Basket
A grower basket is a covenant basket whose permitted amount is tied wholly or partly to a financial measure such as EBITDA, allowing capacity to expand as the borrower grows.
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