covenant


Also found in: Dictionary, Thesaurus, Legal, Idioms, Encyclopedia, Wikipedia.
Related to covenant: Covenant marriage

Covenant

An agreed action to be undertaken (Positive) or not done (Negative). A breach of a covenant is a default.

Covenant

A provision in an indenture. An indenture sets the terms of a bond; its terms include the coupon rate, the period until maturity, and whether the bond comes with any special features like convertibility or whether it is callable. A covenant within an indenture states what actions the issuer and the bondholder may or may not take in certain situations. Covenants (and indentures generally) exist to reduce the risk to all parties to a bond.

covenant

A clause in a loan agreement written to protect the lender's claim by keeping the borrower's financial position approximately the same as it was at the time the loan agreement was made. Essentially, covenants spell out what the borrower may do and must do in order to satisfy the terms of the loan. For example, the borrower may be prohibited from issuing more debt by using certain assets as collateral. Likewise, the borrower may be required to issue reports to bondholders on certain dates. Also called protective covenant, restrictive covenant. See also negative covenant, positive covenant.
Case Study In February 2002 Qwest Communications issued a warning that the company was in danger of violating a bank loan covenant by the end of June. A major slump in the telecom business combined with heavy indebtedness caused concern that the firm's debt would exceed the specified maximum of 3.75 earnings before interest, taxes, depreciation, and amortization. A month later the company announced that in return for agreeing to use $608 million from a $1.5 billion bond issue to reduce bank debt, the bankers agreed to a concession that raised the covenant maximum to 4.25 until the end of September, and 4.00 during the following six months. The covenant had been included as part of the original bank loan agreement in order to help insure that Qwest could continue to meet its existing obligations before taking on additional debt.

covenant

a written agreement by a person to pay a given sum of money to some other person or organization for a specified period of time. Where a covenant arrangement allows a donor relief from income tax on any sums paid over, the covenant provides a tax-efficient means of making financial provision for a relative or charity.

covenant

a specific condition in a legal agreement or CONTRACT. For instance, a formal agreement between a COMMERCIAL BANK and a JOINT-STOCK COMPANY to which it is loaning money might contain a covenant stipulating a limit on dividend distributions from profits.

covenant

An agreement. For example,one can make a “covenant not to compete”a provision of a business sale,or one can write a restrictive covenant regarding the use of real property into the real estate records,which binds all owners whether it is contained in their specific deed or not.

References in periodicals archive ?
Covenant aims to continue their growth as they actively seek to align with like-minded advisors who share their core values.
The covenant also seeks to protect children's rights by opposing the lowering of minimum age of criminal responsibility.
Giving a brief overview of what a covenant entailed, the church's circuit stewart, Mr Phemelo Selabe, explained that a covenant was an agreement that Christians entered into with God.
Now, if you obey my covenant you shall be my possession among all the peoples.
(10) See my working paper for a review of the empirical and theoretical evidence on the effects of covenant violations.
The borough council signed up to be part of the Armed Forces Covenant in 2014.
Unique features of the "The New Covenant Culture includes concepts of:
"Alien: Covenant" tells the story of the crew of a colony ship named Covenant.
The first group mentioned above, believe that prophets in the eighth-century were not aware of the covenant between the Lord and Israel.
Covenant, a provider of comprehensive security services, consists of two (2) operating businesses.
Although an employer may consider a restrictive covenant to be reasonable when the employee leaves, it must also have been reasonable at the time the employee entered into the employment contract and was said to be bound by the restriction.
Michael Sapnar, president and CEO of Transatlantic Reinsurance, led his company to raise more than $50,000 for the youth at Covenant House.