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 ?
(Alliance News) - Pendragon is just the latest vehicle seller to fall prey to the difficult conditions in UK car sales, said Berenberg, though the firm should remain within its debt covenant levels.
An important next step for companies that hold notes payable or lines of credit is to look at the debt covenant ratios.
Detailed organization charts and debt covenant summaries highlight structural priority of obligations and an outlook for covenant compliance, with all issuers discussed having adequate or excellent headroom per our assessment.
48 adoption: a debt covenant theory, reconciling the conflicting results of prior research on the relation between aggressive book and tax reporting, environmental uncertainty and tax avoidance, the impact of bonus depreciation on capital expenditures, generational differences in perceptions of tax fairness and attitudes towards compliance, demand for tax-preparation services: an exploratory examination of client versus tax-preparer expectation gaps, and corporate income tax compliance costs and their determinants: evidence from Greece.
(1) The term financial debt covenant in this study is used to refer to provisions or clauses in a debt contract requiring a borrower to maintain a threshold level of a specified accounting based measure, commonly in the form of a ratio.
LPL's debt covenant limits total net debt to five times adjusted EBITDA and is expected to fall to 4.75 times in the future.
The authors cite the example of a company on the cusp of a default on a debt covenant. Nevertheless, those qualitative issues invariably find quantitative expression, and vice versa.
"Companies' capacity to incur additional debt under the debt covenant fell for the first time since the first half of 2012, contributing to the overall improvement in investor protection", says Lisa Gundy, a Moody's Assistant Vice President - Covenant Analyst.
This paper examines real earnings management and accrual-based earnings management in the quarters around debt covenant violations.
Skinner, Large-Sample Evidence on the Debt Covenant Hypothesis, 40 J.
It says that KPMG's March, 2008, audit report expressed no doubts as to Hicks Sports' ability to continue as a going concern, even though a $600m debt covenant had been exceeded.