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, specified actions relevant to the borrower's creditworthiness. 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
• Breach of covenant
• Compliance
• Contingent covenant
• Credit risk
• Event of default
• Financial covenant
• Generally accepted accounting principles
• Incurrence covenant
• Interest cover
• Loan agreement
• Maintenance covenant
• MCT
• Net worth
• Non-financial covenant
• Restrictive covenant
• Waiver

References

Treasury Essentials: Covenants, The Treasurer, March 2013

Other links

Loan agreement covenant performance, Will Spinney, ACT 2009