covenant

(redirected from covenants)
Also found in: Dictionary, Thesaurus, Medical, Legal, Encyclopedia.
Related to covenants: Restrictive covenants

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 Security adds vertical segments to Allied Universals clientele base, such as commercial real estate, defense and aerospace, and manufacturing and utilities.
Dumbrell, Covenant and Creation: A Theology of the Old Testament Covenants (Carliste: Paternoster Press, 1984), pp.
Sponsors are taking advantage of receptive markets when refinancing their debt and renegotiating the covenants to be in line with covenant features, such as a leverage ratio test that are now market standard.
In the Noahic covenant the original creation covenant is adapted to a world ravaged by sin.
The chapter also introduces stumbling blocks to experiencing covenant blessings and the refining work of the Holy Spirit in moving "covenant" from a doctrinal belief to a passion written on our heart.
If the restrictive covenants were imposed years before it may be difficult to trace the person having the benefit.
It is not uncommon for residential estates, for example, to have a range of covenants placed on them by the original developer.
This case demonstrates how valuable protective covenants can be in guarding an accounting firm's business interests.
In most acquisitions where the target employee-owner played an integral part in the operation of the acquired business, the acquirer and owner will execute a noncompete covenant in connection with the transaction.
In section 1, he stresses that a covenant ideal of mutuality and cooperation always played in the background even as Israel's self-understanding shifted under the power of empire, the emergence of the monarchy, and prophetic criticism of the abuse of power and wealth.
Some finance professionals first see covenants when asked to sign the loan documents, but they have had no preliminary discussions and believe that covenants are a one-sided dictation from the bank.
Covenants are passed from one new owner to another.