Covenants

Condi­ti­ons in corpo­rate loan agree­ments that stipu­late ratios to be met by the borrower. A frequently used ratio is, for exam­ple, net finan­cial debt divi­ded by EBITDA. If a borrower cannot meet this ratio, it is a ‘coven­ant breach’ that entit­les the lender to demand repay­ment of the loan.