One common debt covenant forbids the firm issuing debt from issuing more debt in the future that is senior to the debt that is currently being issued.

1. Does this covenant help the firm or the purchasers of the current debt?

2. As it puts restrictions on the firm on its future actions, why do you think the firm would agree to such a covenant?

Firms that are stuck in dying industries may not have assets that can generate profits, but still have something valuable "Tax loss carryforwards"!

3. Due to the losses they have accumulated over time, the firms are allowed to use these to reduce future tax payments. However, a firm that doesn't expect to make profits in the future will have no tax payments to reduce. If the firm is purchased by a firm that expects to make profits in the future, will these carryforwards increase the price they are willing to pay?