Cencosud SA is a leading Latin American retailer, with approximately US$4.12 billion in shortand long-term debt outstanding as of December 31, 2017. ln its 20-F filing with the Securities and Exchange Commission, Cencosud reports the following: Our loan agreements and outstanding bonds contain a number of covenants requiring us to comply with certain financial ratios and other tests. The most restrictive financial covenants under these loan agreements and bonds require us to maintain:

• A ratio of consolidated Net Financial Debt to consolidated net worth not exceeding 1.2 to 1;
• A ratio of consolidated Net Financial Debt to EBITDA (as defined in the relevant credit agreements) for
  the most recent four consecutive fiscal quarters for such period of less than 5.25 to 1;
• Unencumbered assets in an amount equal to at least 120% of the outstanding principal amount of total
  liabilities;
• Minimum consolidated assets of at least UF 50.5 million11; and
• Minimum consolidated net worth of at least UF 28.0 million.

As of the date of this annual report, we are in compliance with all of our loan and debt instruments.

a. Why do creditors impose restrictive covenants on borrowers?

b. How might restrictive covenants such as these affect management decisions?

c. What implications do these restrictions have on an analysis of the company and its solvency?