Covenant: Difference between revisions
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1. | 1. ''Law.'' | ||
A formal legal agreement to take, or not to take, certain actions. | |||
2. ''Debt documentation - loan documentation - bond documentation.'' | |||
3. In relation to pension funds, the credit strength of the sponsoring employer and its commitment to the pension fund. | In debt documentation, covenants are generally about protecting the lender-investor against an increase in their credit risk relating to the borrower. | ||
In this context, covenants are generally promises given by the borrower to take - or not to take - specified actions relevant to the borrower's creditworthiness. | |||
For example, a borrower's ''financial covenant'' to maintain a minimum ratio of net worth to debt. | |||
Breach - or potential breach - of such a covenant is designed to act as an early warning indicator of potential problems. | |||
3. ''Pensions.'' | |||
In relation to pension funds, the credit strength of the sponsoring employer and its commitment to the pension fund. | |||
== See also == | == See also == | ||
* [[Acceleration]] | |||
* [[Accounting exposure]] | * [[Accounting exposure]] | ||
* [[Asset cover]] | * [[Asset cover]] | ||
* [[Breach of covenant]] | |||
* [[Clause]] | |||
* [[Compliance]] | |||
* [[Condition]] | |||
* [[Contingent covenant]] | |||
* [[Contract]] | |||
* [[Covenant trigger]] | |||
* [[Covenant-lite]] | |||
* [[Credit risk]] | |||
* [[Default]] | |||
* [[Event of default]] | * [[Event of default]] | ||
* [[Financial covenant]] | * [[Financial covenant]] | ||
* [[Generally accepted accounting principles]] | |||
* [[Grace period]] | |||
* [[Headroom]] | |||
* [[Incurrence covenant]] | * [[Incurrence covenant]] | ||
* [[Interest cover]] | * [[Interest cover]] | ||
| Line 18: | Line 45: | ||
* [[Maintenance covenant]] | * [[Maintenance covenant]] | ||
* [[Net worth]] | * [[Net worth]] | ||
* [[Non-financial covenant]] | |||
* [[Representations]] | |||
* [[Restrictive covenant]] | * [[Restrictive covenant]] | ||
* [[Sponsor]] | |||
* [[Term]] | |||
* [[Trigger event]] | |||
* [[Waiver]] | * [[Waiver]] | ||
* [[Warranty]] | |||
== | ==Other links== | ||
[http://www.treasurers.org/node/8842 Treasury Essentials: Covenants, The Treasurer, March 2013] | |||
[[Category:Long_term_funding]] | |||
[[Category:Manage_risks]] | |||
[ | [[Category:Risk_frameworks]] | ||
[[Category:Treasury_operations_infrastructure]] | |||
Latest revision as of 02:59, 24 March 2024
1. Law.
A formal legal agreement to take, or not to take, certain actions.
2. Debt documentation - loan documentation - bond documentation.
In debt documentation, covenants are generally about protecting the lender-investor against an increase in their credit risk relating to the borrower.
In this context, covenants are generally promises given by the borrower to take - or not to take - specified actions relevant to the borrower's creditworthiness.
For example, a borrower's financial covenant to maintain a minimum ratio of net worth to debt.
Breach - or potential breach - of such a covenant is designed to act as an early warning indicator of potential problems.
3. Pensions.
In relation to pension funds, the credit strength of the sponsoring employer and its commitment to the pension fund.
See also
- Acceleration
- Accounting exposure
- Asset cover
- Breach of covenant
- Clause
- Compliance
- Condition
- Contingent covenant
- Contract
- Covenant trigger
- Covenant-lite
- Credit risk
- Default
- Event of default
- Financial covenant
- Generally accepted accounting principles
- Grace period
- Headroom
- Incurrence covenant
- Interest cover
- Loan agreement
- Maintenance covenant
- Net worth
- Non-financial covenant
- Representations
- Restrictive covenant
- Sponsor
- Term
- Trigger event
- Waiver
- Warranty
