Covenant

1. A formal legal agreement to take, or not to take, certain actions.

2. In loan documentation, a promise given by the borrower to take, or not to take, relevant actions. For example, a financial covenant to maintain a minimum ratio of net worth to debt.

3. In relation to pension funds, the credit strength of the sponsoring employer and its commitment to the pension fund.

See also

• Accounting exposure
• Asset cover
• Event of default
• Financial covenant
• Incurrence covenant
• Interest cover
• Loan agreement
• Maintenance covenant
• Net worth
• Restrictive covenant
• Waiver