Springing covenant

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Revision as of 15:15, 1 August 2015 by imported>Doug Williamson (Define 'lite' covenants.)
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Long term funding.

A covenant in a loan agreement which becomes effective on the occurrence of a certain event in the future. Used to enable loan agreements to have fewer and less onerous ('lite') covenants, typically to conform to other loans of the same borrower.

A common springing event is the level of utilisation of a loan facility at which time covenants such as ICR (interest cover ratio) and gearing come into effect.

Springing covenants are a form of contingent covenant.


See also