Cash-trapping mechanism

A condition in financial loan documentation that the issuer is to use all available cash and or certain cash flows after payment of senior expenses and senior interest for the payment of interest and or redemption of principal of specific loan tranches when certain financial ratios are not met or if net cumulative default ratio exceeds certain percentages. In the latter case faster amortization is also a possible requirement to safeguard the interests of lenders. This restricts payments to other debtors and shareholders.