credit risk

(redirected from Debt covenant)

Credit risk

The risk that an issuer of debt securities or a borrower may default on its obligations, or that the payment may not be made on a negotiable instrument. Related: Default risk.

Default Risk

The risk that a debtor will be unable to pay back its loans. Default risk goes up if a debtor has large number of liabilities and poor cash flow. Generally speaking, companies and persons with high default risk stand a greater chance of a loan being denied and pay a higher interest rate on the loans they do receive. See also: Bankruptcy.

credit risk

The risk that a borrower will be unable to make payment of interest or principal in a timely manner.
References in periodicals archive ?
However, debt covenant violations often occur simply because of the inability of the financial managers in an organization to plan properly.
Where a company is unable to borrow additional funds or issue new debt securities--whether because of concerns over the effect on credit ratings, debt covenant restrictions, or regulatory requirements--and does not wish to dilute earnings per share by issuing additional common shares, a preferred share issuance is the only viable course.
Griffin and colleagues David Lont and Kate McClune of the University of Otago tracked insider stock transactions that occurred during or near 1,718 first-time disclosures of debt covenant violations by U.
Previous research by the current authors examined individual debt covenants to determine if identifiable patterns exist and if there is a significant difference in debt covenant utilization among industry classifications.
The brief report 'Limited Debt Covenant Protection for Motorola Bondholders in LBO' provides a detailed LBO scenario as well as additional analysis on Motorola's bond indentures.
COV = dummy variable set equal to one if the debt covenant is included in debt contract, zero otherwise.
We started with a clean slate, and I was able to help negotiate the loan agreement; create a comprehensive financial package for board meetings; design financial models that generated, tracked and projected the company's financial statements, debt covenants and liquidity; and design discounted cash flow models used for lease vs.
While AOL Time Warner executives have said debt covenants would not be affected by the none-cash charge, accounting experts say such charges can hurta company's debt rating as well as its ability to borrow.
They also bore fraud in mind when debt covenants were restrictive in a situation where income was better than expected.
The debt covenants restricted the amount of debt (other than certain short-term debt) that the parent and subsidiary could incur to a certain percentage of the parent's net tangible assets.
Hollywood's decision to pursue equity financing is the result of both the general health of equity markets and its desire to avoid debt covenants that might place constraints on future operations.