Lock-up
The English project finance term for a test that blocks distributions to shareholders while it is failed. Functionally similar to a cash trap.
How it works
Lock-up is the English project finance term for a test that blocks payments to shareholders while it is failed. Cash that cannot be distributed stays in the project company. If the lock-up continues for a set period, the lenders may be entitled to apply the cash to repay debt.
In GPU and data centre deals
Lock-up does the same job as a US-style cash trap. In UK and European data centre project finance it is usually tied to historical and projected DSCR, and sometimes to reserve accounts being fully funded. Lenders and sponsors negotiate how long cash can stay locked up before it is swept.
What gets negotiated
- DSCR level that triggers lock-up
- Other triggers, such as an unfunded reserve or a default
- How long locked-up cash stays before mandatory prepayment
- Sponsor rights to cure with equity
For in-house counsel
Lock-up in the filed documents
Where the term turns up in filed contracts and what is market, for the lender’s or the borrower’s side. Previews are open; the full text is free with InfraCompute Weekly.
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- The legal desk for in-house counselContract library, issues lists, checklists and English law notes.
Related terms
Explanatory definition, not a statement that a particular transaction contains this term or a substitute for its contractual definition.
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