Cash Flow Credit Agreement

Below are the legal terms used in the credit agreement that define excessive cash flow. Under the “Defined Terms” of the agreement, excess cash flow is expressed in an oral formula as “an amount equal to the surplus of”: Cash flow gapThe difference between cash outflows and cash outflows over a defined period. Also known as a liquidity deficit. Cash managementOne or a combination of different techniques to accelerate cash receipts, delay cash payments, effectively use banking services, manage or increase liquidity, increase cash available for investments and/or increase liquid investment income. Credit enhancementA measure that changes the structure of a security in a way that reduces credit risk. Credit enhancement can take the form of a letter of credit for the release of securities. For mortgage-backed securities and debt-backed securities, credit enhancement can take the form of over-insurance agreements. A multi-sovereign guarantee covered by a pool of corporate bonds (usually non-eligible corporate bonds) or government bonds. A bit like the more familiar CMO, except for the fact that, in a CBO, the grades or tranches are established with different levels of credit quality. The CBO structure creates at least one level of investment degree bonds and thus provides liquidity to a portfolio of junk bonds. LCOs are a kind of LCD.

See Collateralized Debt Obligation (CDO), special purpose vehicle and waterfall. Current yield (1) For bonds, a simple measure of annual interest return for investments with coupon rates and maturities of one year or more. For the calculation of the current return, the annual return of the coupon is simply divided by the amount paid for the acquisition of the investment. It is important to note that the current return is only correct for investments in a nominal value product. The current calculation of returns includes only one cash flow of return – annual coupon returns. It ignores the profit or loss resulting from rebates and bonuses. (2) The amount of deposit balances required to offset the costs of deposits, cash management or other banking services.