AHYDO Catch-Up Payment Clause Samples
The AHYDO Catch-Up Payment clause is designed to address the tax implications of certain high-yield debt obligations that defer interest payments. In practice, this clause requires the borrower to make additional payments if the debt instrument risks being classified as an Applicable High Yield Discount Obligation (AHYDO) under U.S. tax law, which can occur if too much interest is accrued but not paid within a specified period. By mandating these catch-up payments, the clause ensures that the debt avoids unfavorable tax treatment, thereby protecting both the borrower and lender from adverse tax consequences.
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AHYDO Catch-Up Payment. On the first Interest Payment Date following the fifth anniversary of the “issue date” (as defined in Treasury Regulation Section 1.1273-2(a)(2), “Issue Date”) of each Loan made on the Closing Date, and on each Interest Payment Date thereafter, the Parent Borrower shall prepay a portion of the principal of such Loan in an amount equal to the AHYDO Catch-Up Payment with respect to such Loan for such Interest Payment Date. On the first Interest Payment Date following the fifth anniversary of the “Issue Date” of any Delayed Draw 1 Term Loan, and on each Interest Payment Date thereafter, the Parent Borrower shall prepay a portion of such Delayed Draw 1 Term Loan in an amount equal to the AHYDO Catch-Up Payment with respect to such Loan for such Interest Payment Date. On the first Interest Payment Date following the fifth anniversary of the “Issue Date” of any Delayed Draw 2 Term Loan, and on each Interest Payment Date thereafter, the Parent Borrower shall prepay a portion of such Delayed Draw 2 Term Loan in an amount equal to the AHYDO Catch-Up Payment with respect to such Loan for such Interest Payment Date. On the first Interest Payment Date following the fifth anniversary of the “Issue Date” of any Revolving Credit Loan, and on each Interest Payment Date thereafter, the Parent Borrower shall prepay a portion of such Revolving Credit Loan in an amount equal to the AHYDO Catch-Up Payment with respect to such Loan for such Interest Payment Date. For the purposes of this Section 2.05(d), the “AHYDO Catch-Up Payment” for a particular Interest Payment Date with respect to a particular Loan means the minimum principal prepayment sufficient to ensure that as of the close of such Interest Payment Date, the aggregate amount which would be includible in gross income with respect to such Loan before the close of such Interest Payment Date (as described in Section 163(i)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”)) does not exceed the sum (described in Section 163(i)(2)(B) of the Code) of (i) the aggregate amount of interest to be paid under such Loan (including for this purpose any AHYDO Catch-Up Payments) made before the close of such Interest Payment Date plus (ii) the product of the issue price of such Loan as defined in Section 1273(b) of the Code (that is, the first price at which a substantial amount of the Loan is sold, disregarding for this purpose sales to bond houses, brokers or similar persons acting in the capacity of underwriters, p...
AHYDO Catch-Up Payment. If a Loan would otherwise constitute an “applicable high yield discount obligation” within the meaning of Section 163(i) of the Code (or any successor provision), on each Payment Date ending on or after the fifth anniversary of the date hereof, Borrower shall make a mandatory prepayment for cash of a portion of such Loan outstanding at such time at par plus any accrued interest thereon as shall be necessary to ensure the Loan shall not be considered an “applicable high yield discount obligation.”
AHYDO Catch-Up Payment. Notwithstanding anything to the contrary herein, if a Loan would otherwise constitute an “applicable high yield discount obligation” within the meaning of Section 163(i) of the Code, on each Payment Date after the fifth anniversary of the Borrowing Date (treating the Borrowing Date for a PIK Loan for this purpose as the Borrowing Date for the Loan with respect to which Borrower elects to pay interest in kind pursuant to Section 3.02(d)), Borrower shall pay in cash the accrued and unpaid interest and original issue discount (determined in accordance with Treasury Regulations §§ 1.1272-1 and 1.1273-1, and treating any cash payments made pursuant to this Agreement, including Section 3.01, Section 3.02 or Section 3.03, as a payment of interest or original issue discount to the extent required by Treasury Regulations §1.1275-2(a)) in the minimum amount necessary to ensure that the Loan shall not constitute an “applicable high yield discount obligation.”
AHYDO Catch-Up Payment. On the last day of each “accrual period” that ends after the fifth anniversary of the Issue Date, the Company shall pay an amount equal to the difference between (i) the excess of (A) the sum of all interest that would be includible in gross income with respect to this Note as of such date (including all original issue discount) over (B) the sum of all cash interest payments made with respect to this Note on or prior to such date, and (ii) the product of (A) this Note’s issue price (as defined in Sections 1273(b) and 1274(a) of the Code) and (B) this Note’s yield to maturity, all such items to be calculated as required under Section 163(i) of the Code, the timely payment of which hereunder shall cause this Note not to be an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Code (or any successor provision of similar import).
AHYDO Catch-Up Payment. Notwithstanding anything to the contrary in this Agreement, before the end of each “accrual period” (as defined in Section 1272(a)(5) of the Code) ending after the fifth anniversary of the “issue date” (as defined in Treasury Regulation Section 1.1273-2(a)(2)) of the Initial Term Loans, the Borrower shall prepay a portion of the Initial Term Loans in an amount equal to the Mandatory Catch-Up Amount with respect to the Initial Term Loans for such date. It is the intention of this Section 2.21 that the Initial Term Loans will not be an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Code, and this Section 2.21 shall be interpreted consistently with such intent. If there is more than one Lender at the time of any prepayment described in this Section 2.21, each prepayment of the Initial Term Loans made in accordance with this Section 2.21 shall be paid to the Lenders in accordance with their respective pro rata shares of such prepayment. The computations and determinations required under this Section 2.21 shall be made by Borrower in its good faith reasonable discretion. For purposes of this Section 2.21, “Mandatory Catch-Up Amount” means the amount of the Initial Term Loans required to be prepaid to ensure that, as of the close of an applicable accrual period, the aggregate amount which would be includible in gross income with respect to the Initial Term Loans before the close of such accrual period does not exceed the sum (described in Section 163(i)(2)(B) of the Code) of (i) the aggregate amount of interest to be paid on such Initial Term Loans (including for this purpose any Mandatory Catch-Up Amount payments) before the close of such accrual period plus (ii) the product of the issue price (as defined in Section 1273(b) of the Code) of the Initial Term Loans and their yield to maturity (within the meaning of Section 163(i)(2)(B) of the Code), with the result that the Initial Term Loans are not treated as having “significant original issue discount” within the meaning of Section 163(i)(1)(C) of the Code.
AHYDO Catch-Up Payment. Notwithstanding any provision contained in this Agreement, on or before the end of each accrual period (within the meaning of Section 163(i)(2)(A) of the Internal Revenue Code) that ends after the fifth anniversary of the Notes’ issuance, the Borrower shall pay in cash to the Lenders such amount as shall be necessary to ensure that the Loans shall not be considered “applicable high yield discount obligations” within the meaning of Section 163(i) of the Internal Revenue Code or any successor provision (an “AHYDO Catch-Up Payment”).
AHYDO Catch-Up Payment. Notwithstanding anything to the contrary in this Agreement or in the Notes, if (a) the Notes remain outstanding as of the last day of any accrual period (as defined in Code Section 1272(a)(5)) after the fifth anniversary of the initial issuance thereof (as determined for income tax purposes) and (b) the aggregate amount of the accrued but unpaid interest on the Notes (including any amounts treated as interest for U.S. federal income tax purposes, such as “original issue discount”) as of any Testing Date (as that term is defined below) occurring after such fifth anniversary exceeds an amount equal to the Maximum Accrual (as that term is defined below), then all such accrued but unpaid interest on the Notes (including any amounts treated as interest for U.S. federal income tax purposes, such as “original issue discount”) as of the Testing Date in excess of an amount equal to the Maximum Accrual shall be paid in cash by the Borrower to the holder of the Notes on such Testing Date. Any payment under this Section shall be treated as a payment of interest or principal, as applicable, otherwise due under the Notes. As used in this Section, the term:
AHYDO Catch-Up Payment. On or before the end of the first accrual period following the fifth anniversary of the making of the first Revolving Loan hereunder, and on each Interest Payment Date thereafter, the Borrower shall make a payment with respect to such Loan in an amount equal to the Senior AHYDO Amount. For the purposes of this Section 2.14(f), “Senior AHYDO Amount” means the amount sufficient to ensure that the first Revolving Loan made hereunder will not be an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Internal Revenue Code. Each payment of the Senior AHYDO Amount will be applied in full, notwithstanding Sections 2.15 and 2.16, to prepay the first Revolving Loan made hereunder. It is the intention of this Section 2.14(f) that the first Revolving Loan made hereunder will not be an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Internal Revenue Code.
AHYDO Catch-Up Payment. If a Loan hereunder would otherwise constitute an ‘applicable high yield discount obligation’ within the meaning of Section 163(i)(1) of the Code (an “AHYDO”), on any Payment Date on or after the accrual period that ends after the date that is five years after the date of the Borrowing of such Loan, Borrower shall pay a minimum amount of accrued and unpaid interest on the Loan (including any Applicable PIK Amount that has been added to the principal balance of the Loans) in cash as shall be necessary to ensure that the Loan shall not be considered an AHYDO.
AHYDO Catch-Up Payment. Notwithstanding anything to the contrary contained herein, if, on the last day of any accrual period (as defined in Section 1272(a)(5) of the Code) ending after the fifth anniversary of the Closing Date, (i) the aggregate amount that would be includible in income of the Lender with respect to the Loan for periods ending on or before such date (within the meaning of Section 163(i) of the Code) would, but for this paragraph, exceed (ii) an amount equal to the sum of (x) the aggregate amount to be paid (within the meaning of Section 163(i) of the Code) under the Loan on or before such day and (y) the product of (A) the issue price (as defined in Sections 1273(b) and 1274(a) of the Code) of the Loan multiplied by (B) the yield to maturity (interpreted in accordance with Section 163(i) of the Code) of the Loan, the Borrower will prepay on such day, without premium or penalty, the minimum amount of principal plus accrued interest on the Loan necessary to prevent any of the accrued and unpaid interest and original issue discount on the Loan from being disallowed or deferred as a deduction under Section 163(e)(5) of the Code to the Borrower.