Covenants

In debt markets, covenants form a vital element of legal documentation governing transactions. Covenants can be positive i.e. require companies to take certain actions. Or negative i.e. require companies not to take certain actions. Common covenants include debt-to-EBITDA caps, interest coverage caps and debt-to-equity caps, limits on M&A or divestments, limits on dividend pay-outs, and limits on borrowing or borrowing at stated parts of the capital structure