In cash-flow based project finance transactions, it is customary that banks require distributions to sponsors to be limited or subjected to certain tests. As such, cash distributions will regularly be permitted only if
- no event of default or potential event of default has occurred, is continuing or would occur as a result of a distribution
- the reserve accounts are funded by amounts of not less than their required balance
- on the most recent calculation date the relevant cover ratios, e.g. DSCR, LLCR, PLCR have been tested successfully
- construction completion has occurred
- the first scheduled repayment of senior debt has occurred.