During financial due diligence, the investment banker finds that the target is close to breaching its debt service coverage ratio covenant. Which of the following is the MOST LIKELY implication for the transaction?

1. AThere will be no impact if the loan is not in default
2. BThe buyer may need to renegotiate with the company’s lenders before closing✓ Correct answer
3. CThe seller can simply pay down all debt without consent
4. DThe purchase price automatically increases

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