covenant

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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 ?
For purposes of avoiding the inversion rule when substantial business activities exist, taxpayers must understand EAGs.
For me, a purpose of preaching is to keep me spiritually disciplined.
The real purpose of the euphemism is to deceive us--to hide a truth that the inventors of the euphemism do not want us to know--or if we do know it, they want to soften its negative or offensive impact.
In her book, Barefootin': Life Lessons from the Road to Freedom (Crown; $23), Blackwell, now 73, writes, "I did not discover my life's work through a heavenly voice or a brilliant flash of glory, [but] I knew my life had purpose.
Again, the court could not find any code provision that permits the use of a capital loss in the computation of the ATNOL but noted that, for regular tax purposes, the code does not allow the deduction of a capital loss when computing an NOL.
Historically, special purpose vehicles in the United Kingdom and Ireland have been treated the same as traditional insurers, including a lengthy authorization process and strict capital requirements.
The confidentiality provisions are generally intended to prevent third parties from using the information in the actuarial reports for unintended and unsuitable purposes.
The City then authorized the NLDC to exercise the power of eminent domain for the purpose of acquiring property within the development area.
The most significant changes involve the purposes for which FISA-authorized electronic monitoring and searches may be used and the exchange of information between criminal and foreign intelligence investigators.
The eye, he argues, like the telescope, represents a complex instrument created specifically for the purposes of sight.
Assessment as a process begins with the stating of a purpose in terms of what is valued and what the educators wish to do with pedagogy, curricula, and programs to enhance the meeting of that purpose.
For purposes of this section other than paragraph (e) and for purposes of section 225.