Series 7: 3.5.2.1.1 Rate Covenant

Taken from our Series 7 Top-off Online Guide

3.5.2.1.1 Rate Covenant

A rate covenant requires the issuer to set rates or fees at levels sufficient to generate revenue at some designated threshold. This threshold should be sufficient to cover the project’s operating expenses and debt service, plus a reserve cushion of, say, 110%. The designated threshold level is known as a coverage ratio.

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