Ratio Covenant

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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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References in periodicals archive ?
Roth Capital analyst John White downgraded Halcon Resources to Neutral from Buy with a $3.50 price target, saying the company has has classified the outstanding borrowings under its senior credit agreement as a current liability and further advised that its current internal projections show that it will not be in compliance with the consolidated total net debt to EBITDA ratio and the current ratio covenants in future periods.
The cash flow coverage ratio covenants include distribution lock-up at 1.40x and default at 1.10x, which are weaker because no principal is currently being amortised.
According to the company, since December 2016, it has had a deferment of amortisation and fulfilment of key ratio covenants under a so-called standstill agreement.
lack of financial ratio covenants. In addition, as the Notes are secured
Demerjian (2007) studied the choice of financial ratio covenants in debt agreements and found that borrowers with positive earnings, high profitability and low volatility earnings are likely to include covenants in debt agreements related to earnings, such as coverage of the debt to cash flow.
The amendment will lower annual commitment fees by approximately USD 500,000 and modify certain financial and leverage ratio covenants, according to Ferro.
Last October, Freedom disclosed it was not in compliance with debt-to-revenue ratio covenants of its loan agreement.
Consider including net-worth and financial ratio covenants in the lease documents.
Other restrictive covenants to be aware of are maximum leverage ratio covenants.