Loan Covenant


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Loan Covenant

A provision in a loan agreement binding the borrower or lender. A loan covenant states what actions the borrower and the lender may or may not take in certain situations. Covenants exist to reduce the risk to all parties to a loan.
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The loan covenant will next be tested on 20 December 2012.
Lloyds, Barclays and Royal Bank of Scotland have all agreed to waive a loan covenant test due at the end of the May and to provide cash until the end of August while a long-term recovery plan is put in place.
The Bank of Scotland will also waive the loan covenant it was set to breach at the end of January.
Mark Rusch, PME's CFO and partner, also provides the bank with detailed aged payables and receivables; inventory totals; monthly loan covenant calculations, which include debt-to-tangible net worth and current ratio calculations; collateral reports, with a breakdown of payables and receivables used in the calculations; and quarterly cash flow coverage.
In many cases you could argue that loan covenant violations during the initial quarters after a transaction closing are as much the fault of the lending institution who designed the structure as the borrower that accepted the deal.
The Company also announced that it had been advised by certain of its banks that they had approved the waivers that had been requested for certain technical loan covenant defaults as of December 31, 2008.
A typical bank revolving loan covenant, for example, may set out the following requirements: a minimum amount of shareholders' equity, a maximum debt-to-equity ratio, and/or a minimum current ratio.
11 /PRNewswire/ -- Bank Debt Review announces its new Core Bank Loan Covenant service.
7 out of 10 believe the impact will be greater potential for loan covenant violations, lenders will exert more influence in resolving the situation and more companies will reorganize under Chapter 11.
Upon reflection, I should have expanded my answer to the question from the investor to specifically address this loan covenant issue.
pSivida's lender agrees to release the Company from loan covenant necessary to complete specified financing transactions with Nordic Biotech Advisors and gives other relief
Fitch notes that leveraged loan covenant packages have declined significantly over the past several years, diminishing the ability to align borrower's actions with the interests of lenders and degrading the early warning system in case of borrowers' financial distress.