Which of these debt types has incurrence covenants?

Incurrence covenants are specific types of covenants that come into play at certain points in time, typically tied to specific actions taken by the borrower, such as incurring additional debt or conducting a particular financial transaction. These covenants are common in certain types of debt instruments to help lenders mitigate risk by ensuring that the borrower's financial health remains favorable throughout the term of the loan.

Senior notes often contain incurrence covenants because they represent a senior claim in the capital structure and lenders want to protect their interests by limiting the borrower's ability to take on additional risky financial obligations that could jeopardize repayment. Similarly, subordinated notes may also include incurrence covenants. While subordinated debt ranks below senior debt in terms of claims on assets, lenders still want to ensure that the issuer maintains a healthy financial position, especially because subordinated lenders accept more risk for a higher potential return.

By contrast, other forms of debt, like certain types of revolving credit facilities, often focus on maintenance covenants, which require the borrower to maintain certain financial ratios throughout the life of the loan.

The correct option highlights that both subordinated notes and senior notes include incurrence covenants. This understanding underscores the emphasis on protecting lender interests across different types of debt within the