Covenant

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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


Other links

Treasury Essentials: Covenants, The Treasurer, March 2013