Contingent covenant
From ACT Wiki
Loan documentation.
A contingent covenant is a covenant in borrowings documentation which is contingent on a particular event or measure.
A common example is a contingent covenant linked with the borrower's credit rating.
The existence of such covenants is a very significant source of risk for borrowers which are close to the boundary where the covenant might be triggered, for example following any further deterioration in the borrower's credit rating.
