Loan covenants help ensure that borrowers don't do anything that can impact the credit quality of the Loan
Typical covenants include:
Typical covenants include:
- Prohibition on the creditor taking out additional debt
- Prohibitions on the creditor selling or otherwise encumbering colalteral
- Prepaying other forms of debt first
- Issuing additional debt in a senior or similar position
- Paying large dividends to equity holders
- Covenants can also help generate additional income for lenders
- When a borrower breaks a covenant, the lender may negotiate a amendment fee or set the loan at a higher rate
Other Covenant Info
- Coventants can be referred to as " the fine print"