What is a Financial Covenant?
Covenants oblige borrowers to adhere to a set of conditions, typically in the form of a set of financial metrics and ratios. Here, Tim goes into further detail by outlining typical triggers, consequences and specific types.
Overview
Covenants are conditions in a borrowing document that ensure the borrower maintains certain financial ratios to assure the lender that they are, and will continue to be, financially able to repay them.
Key learning objectives:
Define covenants
Explain the purpose of covenants and what they prevent
Describe the different types of covenants
Summary
Expert
Tim Skeet
Banker with more than 35 years experience in the financial markets. Tim has been an ICMA board member and an ECBC steering committee member. Tim is a Freeman of the City of London.
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