Contingent covenant

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Revision as of 18:30, 26 July 2015 by imported>Doug Williamson (Amend to 'according to'.)
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Loan documentation.

A contingent covenant is a covenant which comes into effect only if the borrower is doing badly, according to some pre-agreed measure or other test.

Its purpose is to allow the borrower to retain operational flexibility while its credit remains strong, but to allow the lender to impose restrictions on the borrower's flexibility when restrictions or renegotiations become appropriate.


See also