Ratio Covenant

Ratio Covenant

Any covenant in a loan agreement that uses a financial ratio. For example, a ratio covenant may prohibit more than a certain amount of leverage and may use a gearing ratio to determine this.
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For this particular loan, Udenna breached its key ratio covenant, but management said it has no material impact on its financial statements.
In March 2018, the revolver was amended to provide additional leverage ratio covenant headroom for the period ending June 30, 2018.
Also, these credit facilities remain subject to an interest cover ratio covenant of 4.00:1 and a leverage ratio covenant of 4.00:1.
In each of the three observations illustrated, the interest coverage ratio covenant is satisfied, but the margin by which it is met varies by more than 40% just between observations 1 and 2.
RCS Capital Corporation (NYSE: RCAP) said it has agreed with its first and second lien lenders under its existing credit facilities to certain leverage ratio covenant amendments in addition to other modifications.
Although PLUS Berhad is not required to maintain a DE ratio covenant, the company's leverage is deemed high for its standalone rating.
The facility also contains amendments to the covenant package including the suspension of the net debt to EBITDA ratio covenant until 1 July 2016 and changes to the balance sheet gearing covenants to make them more appropriate to the Group's projected financial profile through until the completion of Bozshakol.
The amendment is said to increase the flexibility under the total leverage ratio covenant, increase the interest rate payable with respect to outstanding loans under the facility by 1.5%, and provide for certain changes to the excess cash flow mandatory prepayment and call protection provisions under the facility.
We also are pleased with the amendment in the leverage ratio covenant as it allows us greater flexibility to operate in the case of an extended low commodity price cycle.
If management wants to engage in an action that increases the company's business risk, even one not specifically proscribed by the loan agreement, creditors can invoke the breach of the interest coverage ratio covenant to forestall the action.
This facility amending agreement contains additional revisions, including the release of Tenke Holdings Ltd as a guarantor, deleting the total debt to tangible net worth ratio covenant and increased permitted indebtedness and liens allowances.
The credit facility is currently subject to a maximum debt-to-capitalization ratio covenant of 65% and as of June 30, 2018, BKH was in compliance with a debt to capitalization ratio of 58%, as defined under the agreement.