Financial covenant - Revision history

imported>Doug Williamson: Add link.

2023-03-11T22:29:09Z

Add link.

← Older revision		Revision as of 22:29, 11 March 2023
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	* [[EBITDA]]		* [[EBITDA]]
	* [[Event of default]]		* [[Event of default]]
			* [[Financial]]
	* [[Financial ratio]]		* [[Financial ratio]]
	* [[Frozen GAAP]]		* [[Frozen GAAP]]

imported>Doug Williamson: Mend link.

2021-03-20T19:45:51Z

Mend link.

← Older revision		Revision as of 19:45, 20 March 2021
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	* [[Covenant]]		* [[Covenant]]
	* [[Cross acceleration]]		* [[Cross acceleration]]
	* [[Debt to EBITDA]]		* [[Debt to EBITDA ratio]]
	* [[Default]]		* [[Default]]
	* [[EBITDA]]		* [[EBITDA]]

imported>Doug Williamson: Layout.

2021-03-20T17:59:53Z

Layout.

← Older revision		Revision as of 17:59, 20 March 2021
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	Commonly used financial covenants on loan agreements, in addition to minimum interest cover, include:		Commonly used financial covenants on loan agreements, in addition to minimum interest cover, include:

	1. Minimum tangible net worth – as this is a measure of solvency		:1. Minimum tangible net worth – as this is a measure of solvency

	2. Ratio of maximum borrowings to tangible net worth – to preserve the level of solvency		:2. Ratio of maximum borrowings to tangible net worth – to preserve the level of solvency

	3. Net or gross debt to EBITDA (times) – measure of liquidity		:3. Net or gross debt to EBITDA (times) – measure of liquidity

	4. Ratio of current assets to current liabilities, and minimum level of working capital – which are other measures of liquidity		:4. Ratio of current assets to current liabilities, and minimum level of working capital – which are other measures of liquidity

	5. Limitations on payment of dividends as a ratio of earnings – to preserve net worth		:5. Limitations on payment of dividends as a ratio of earnings – to preserve net worth


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	== See also ==		== See also ==
			* [[Breach of covenant]]
	* [[Condition]]		* [[Condition]]
	* [[Contract]]		* [[Contract]]
	* [[Covenant]]		* [[Covenant]]
	* [[Cross acceleration]]		* [[Cross acceleration]]
			* [[Debt to EBITDA]]
	* [[Default]]		* [[Default]]
	* [[EBITDA]]		* [[EBITDA]]

imported>Doug Williamson: Add link.

2021-01-23T23:12:13Z

Add link.

← Older revision		Revision as of 23:12, 23 January 2021
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	* [[EBITDA]]		* [[EBITDA]]
	* [[Event of default]]		* [[Event of default]]
			* [[Financial ratio]]
	* [[Frozen GAAP]]		* [[Frozen GAAP]]
	* [[Headroom]]		* [[Headroom]]

imported>Doug Williamson: Add links.

2020-05-11T20:49:30Z

Add links.

← Older revision		Revision as of 20:49, 11 May 2020
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	== See also ==		== See also ==
			* [[Condition]]
	* [[Contract]]		* [[Contract]]
	* [[Covenant]]		* [[Covenant]]
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	* [[Loan agreement]]		* [[Loan agreement]]
	* [[Loan to value]]		* [[Loan to value]]
			* [[Representations and warranties]]
	* [[Risk]]		* [[Risk]]
	* [[Solvency]]		* [[Solvency]]

imported>Doug Williamson: Add links.

2020-05-04T11:07:47Z

Add links.

← Older revision		Revision as of 11:07, 4 May 2020
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	* [[Liquidity]]		* [[Liquidity]]
	* [[Loan agreement]]		* [[Loan agreement]]
			* [[Loan to value]]
			* [[Risk]]
	* [[Solvency]]		* [[Solvency]]
	* [[Tangible net worth]]		* [[Tangible net worth]]

imported>Doug Williamson: Add links.

2020-04-28T23:15:04Z

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← Older revision		Revision as of 23:15, 28 April 2020
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	Its purpose is to impose a level of financial discipline on the borrower such that the borrower acts within the limits imposed by the constraints~~. The clause also aims to prevent the borrower from acting in a manner that is likely to reduce credit worthiness during the time period that the loan is outstanding~~.		Its purpose is to impose a level of financial discipline on the borrower such that the borrower acts within the limits imposed by the constraints.

	~~For example, an interest cover covenant might state that interest cover will be no less than 3 times;~~ the borrower ~~promises~~ that the ~~ratio will always exceed~~ the ~~set figure~~.		The clause also aims to prevent the borrower from acting in a manner that is likely to reduce credit worthiness during the time period that the loan is outstanding.

	Financial covenants are tested at certain pre-determined intervals~~; annually~~, ~~in the above~~ example.
			For example, an interest cover covenant might state that interest cover will be no less than 3 times.

			The borrower promises that the ratio will always exceed the set figure.


			Financial covenants are tested at certain pre-determined intervals, for example annually.


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	* [[Contract]]		* [[Contract]]
	* [[Covenant]]		* [[Covenant]]
			* [[Cross acceleration]]
			* [[Default]]
	* [[EBITDA]]		* [[EBITDA]]
	* [[Event of default]]		* [[Event of default]]
	* [[Frozen GAAP]]		* [[Frozen GAAP]]
	* [[Headroom]]		* [[Headroom]]
			* [[Interest cover]]
	* [[Interest rate risk]]		* [[Interest rate risk]]
			* [[Liquidity]]
	* [[Loan agreement]]		* [[Loan agreement]]
			* [[Solvency]]
			* [[Tangible net worth]]
	* [[Translation risk]]		* [[Translation risk]]
	* [[Waiver]]		* [[Waiver]]
			* [[Working capital]]

	[[Category:Treasury_operations_infrastructure]]		[[Category:Treasury_operations_infrastructure]]

imported>Doug Williamson: Layout.

2019-07-16T11:49:11Z

Layout.

← Older revision		Revision as of 11:49, 16 July 2019
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	''Loan documentation. ''		''Loan documentation. ''

	A clause in a loan agreement that commits the borrower to operate within predefined financial constraints.		A financial covenant is a clause in a loan agreement that commits the borrower to operate within predefined financial constraints.


	Its purpose is to impose a level of financial discipline on the borrower such that the borrower acts within the limits imposed by the constraints. The clause also aims to prevent the borrower from acting in a manner that is likely to reduce credit worthiness during the time period that the loan is outstanding.		Its purpose is to impose a level of financial discipline on the borrower such that the borrower acts within the limits imposed by the constraints. The clause also aims to prevent the borrower from acting in a manner that is likely to reduce credit worthiness during the time period that the loan is outstanding.
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	Commonly used financial covenants on loan agreements, in addition to minimum interest cover, include;		Commonly used financial covenants on loan agreements, in addition to minimum interest cover, include:

	1. Minimum tangible net worth – as this is a measure of solvency		1. Minimum tangible net worth – as this is a measure of solvency
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	* [[Contract]]		* [[Contract]]
	* [[Covenant]]		* [[Covenant]]
			* [[EBITDA]]
	* [[Event of default]]		* [[Event of default]]
	* [[Frozen GAAP]]		* [[Frozen GAAP]]
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	* [[Loan agreement]]		* [[Loan agreement]]
	* [[Translation risk]]		* [[Translation risk]]
			* [[Waiver]]

	[[Category:Treasury_operations_infrastructure]]		[[Category:Treasury_operations_infrastructure]]

imported>Doug Williamson: Layout.

2019-07-10T11:14:31Z

Layout.

← Older revision		Revision as of 11:14, 10 July 2019
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	A clause in a loan agreement that commits the borrower to operate within predefined financial constraints.		A clause in a loan agreement that commits the borrower to operate within predefined financial constraints.

	Its purpose is to impose a level of financial discipline on the borrower such that he acts within the limits imposed by the constraints~~, and~~ also to prevent ~~him~~ from acting in a manner that is likely to reduce ~~his~~ credit worthiness during the time period that the loan is outstanding.		Its purpose is to impose a level of financial discipline on the borrower such that the borrower acts within the limits imposed by the constraints. The clause also aims to prevent the borrower from acting in a manner that is likely to reduce credit worthiness during the time period that the loan is outstanding.

	For example, an interest cover covenant might state that interest cover will be no less than 3 times; the borrower promises that the ratio will always exceed the set figure.		For example, an interest cover covenant might state that interest cover will be no less than 3 times; the borrower promises that the ratio will always exceed the set figure.

	Financial covenants are tested at certain pre-determined intervals; annually, in the above example.		Financial covenants are tested at certain pre-determined intervals; annually, in the above example.


	Commonly used financial covenants on loan agreements, in addition to minimum interest cover, include;		Commonly used financial covenants on loan agreements, in addition to minimum interest cover, include;
	1. Minimum tangible net worth – as this is a measure of solvency,
	2. Ratio of maximum borrowings to tangible net worth – to preserve the level of solvency,		1. Minimum tangible net worth – as this is a measure of solvency
	3. Net or gross debt to EBITDA (times) – measure of liquidity,
	4. Ratio of ~~Current Assets~~ to ~~Current Liabilities~~, and ~~Minimum~~ level of ~~Working Capital~~ – which are other measures of liquidity,		2. Ratio of maximum borrowings to tangible net worth – to preserve the level of solvency
	5. Limitations on payment of dividends as a ratio of earnings – to preserve net worth.
			3. Net or gross debt to EBITDA (times) – measure of liquidity

			4. Ratio of current assets to current liabilities, and minimum level of working capital – which are other measures of liquidity

			5. Limitations on payment of dividends as a ratio of earnings – to preserve net worth


	Breach of a financial covenant would normally constitute an event of default.		Breach of a financial covenant would normally constitute an event of default.

imported>Gmelatur@gmail.com at 11:50, 21 June 2019

2019-06-21T11:50:56Z

← Older revision		Revision as of 11:50, 21 June 2019
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	A clause in a loan agreement that commits the borrower to operate within predefined financial constraints.		A clause in a loan agreement that commits the borrower to operate within predefined financial constraints.

			Its purpose is to impose a level of financial discipline on the borrower such that he acts within the limits imposed by the constraints, and also to prevent him from acting in a manner that is likely to reduce his credit worthiness during the time period that the loan is outstanding.

	For example, an interest cover covenant might state that interest cover will be no less than 3 times; the borrower promises that the ratio will always exceed the set figure.		For example, an interest cover covenant might state that interest cover will be no less than 3 times; the borrower promises that the ratio will always exceed the set figure.

			Financial covenants are tested at certain pre-determined intervals; annually, in the above example.

			Commonly used financial covenants on loan agreements, in addition to minimum interest cover, include;
			1. Minimum tangible net worth – as this is a measure of solvency,
			2. Ratio of maximum borrowings to tangible net worth – to preserve the level of solvency,
			3. Net or gross debt to EBITDA (times) – measure of liquidity,
			4. Ratio of Current Assets to Current Liabilities, and Minimum level of Working Capital – which are other measures of liquidity,
			5. Limitations on payment of dividends as a ratio of earnings – to preserve net worth.

	Breach of a financial covenant would normally constitute an event of default.		Breach of a financial covenant would normally constitute an event of default.