{"id":43986,"date":"2017-11-26T16:19:32","date_gmt":"2017-11-26T14:19:32","guid":{"rendered":"https:\/\/newserver.fyb.de\/produkt\/financial-covenants-in-lbos-before-and-after-the-lehman-collapse\/"},"modified":"2017-11-26T16:19:32","modified_gmt":"2017-11-26T14:19:32","slug":"financial-covenants-in-lbos-before-and-after-the-lehman-collapse","status":"publish","type":"product","link":"https:\/\/www.fyb.de\/en\/produkt\/financial-covenants-in-lbos-before-and-after-the-lehman-collapse\/","title":{"rendered":"Financial covenants in LBOs before and after the Lehman collapse"},"content":{"rendered":"

Prof. Dr. Dr. Ann-Kris\u00adtin Achleit\u00adner<\/strong> \u2014 Holder of the KfW Endo\u00adwed Chair for Entre\u00adpre\u00adneu\u00adrial Finance\/ Center for Entre\u00adpre\u00adneu\u00adrial and Finan\u00adcial Studies (CEFS), TU Munich<\/p>\n

Dr. Caro\u00adlin Bock<\/strong> \u2014 Rese\u00adarch Asso\u00adciate Center for Entre\u00adpre\u00adneu\u00adrial and Finan\u00adcial Studies (CEFS), TU Munich<\/p>\n

Florian Tapp\u00adei\u00adner<\/strong> \u2014 Rese\u00adarch Asso\u00adciate Center for Entre\u00adpre\u00adneu\u00adrial and Finan\u00adcial Studies (CEFS), TU Munich<\/p>\n","protected":false},"excerpt":{"rendered":"

Covenants are an essen\u00adtial part of the loan agree\u00adment obli\u00adga\u00adti\u00adons in LBO tran\u00adsac\u00adtions. Finan\u00adcial covenants in parti\u00adcu\u00adlar play an important role in credit agree\u00adment clauses.<\/strong><\/p>\n

The finan\u00adcial crisis and the accom\u00adpany\u00ading credit crunch led to a slump in LBO-based corpo\u00adrate take\u00adovers. Since the collapse of Lehman Brot\u00adhers, the gene\u00adral contrac\u00adtual covenants and finan\u00adcial covenants have also become much stricter.<\/p>\n

This is the conclu\u00adsion of a survey conduc\u00adted by the KfW Chair of Entre\u00adpre\u00adneu\u00adrial Finance at the Tech\u00adni\u00adcal Univer\u00adsity of Munich among Euro\u00adpean lead arran\u00adgers and private equity firms on the importance and design of finan\u00adcial covenants in LBO tran\u00adsac\u00adtions before and after the Lehman collapse. For the study, a stan\u00addar\u00addi\u00adzed ques\u00adti\u00adon\u00adn\u00adaire was sent to 307 addres\u00adsees, to which 25 lead arran\u00adgers and private equity firms of various sizes and regio\u00adnal focus responded.<\/p>\n

Basic infor\u00adma\u00adtion on covenants<\/strong><\/p>\n

Covenants are ancil\u00adlary contrac\u00adtual obli\u00adga\u00adti\u00adons with which the borrower is bound as part of the loan agree\u00adment. Two types of covenants can be distin\u00adgu\u00adis\u00adhed: Non-finan\u00adcial covenants and finan\u00adcial covenants. Non-finan\u00adcial covenants are prima\u00adrily aimed at ensu\u00adring that the borrower cannot take any actions that reduce the value of the loan to the credi\u00adtor. They include, for exam\u00adple, assu\u00adran\u00adces by the borrower to obtain the credi\u00adtor\u2019s consent for certain profit distri\u00adbu\u00adti\u00adons or plan\u00adned invest\u00adment projects. This means that the opera\u00adtio\u00adnal use of liqui\u00addity surplu\u00adses can be better control\u00adled. The lender\u2019s requi\u00adred decla\u00adra\u00adtion of consent to restruc\u00adtu\u00adring tran\u00adsac\u00adtions protects it against an unwan\u00adted change in the capi\u00adtal struc\u00adture. Other objec\u00adti\u00adves of non-finan\u00adcial covenants are to improve the lender\u2019s infor\u00adma\u00adtion posi\u00adtion about the borrower or to allow the lender regu\u00adlar insight into company data. Non-finan\u00adcial covenants also include obli\u00adga\u00adti\u00adons such as opera\u00adting in compli\u00adance with the law or envi\u00adron\u00admen\u00adtal requirements.<\/p>\n","protected":false},"featured_media":41064,"comment_status":"open","ping_status":"closed","template":"","meta":{"wp_typography_post_enhancements_disabled":false},"product_brand":[],"product_cat":[2452,2511,2513,2528,2532],"product_tag":[1867,1870,1873,1876],"class_list":{"0":"post-43986","1":"product","2":"type-product","3":"status-publish","4":"has-post-thumbnail","6":"product_cat-ebook-en","7":"product_cat-fyb-2010-2","8":"product_cat-prof-dr-dr-ann-kristin-achleitner-en","9":"product_cat-dr-carolin-bock-en","10":"product_cat-florian-tappeiner-en","11":"product_tag-ann-kristin-achleitner-en","12":"product_tag-carolin-bock-en","13":"product_tag-financial-covenants-en","14":"product_tag-lbo-transactions","15":"pa_sprache-english-3","16":"pa_sprache-german","18":"first","19":"outofstock","20":"taxable","21":"shipping-taxable","22":"purchasable","23":"product-type-variable"},"yoast_head":"\nFinancial covenants in LBOs before and after the Lehman collapse - FYB Financial Yearbook<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.fyb.de\/en\/produkt\/financial-covenants-in-lbos-before-and-after-the-lehman-collapse\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Financial covenants in LBOs before and after the Lehman collapse - FYB Financial Yearbook\" \/>\n<meta property=\"og:description\" content=\"Covenants are an essential part of the loan agreement obligations in LBO transactions. Financial covenants in particular play an important role in credit agreement clauses. The financial crisis and the accompanying credit crunch led to a slump in LBO-based corporate takeovers. Since the collapse of Lehman Brothers, the general contractual covenants and financial covenants have also become much stricter. This is the conclusion of a survey conducted by the KfW Chair of Entrepreneurial Finance at the Technical University of Munich among European lead arrangers and private equity firms on the importance and design of financial covenants in LBO transactions before and after the Lehman collapse. For the study, a standardized questionnaire was sent to 307 addressees, to which 25 lead arrangers and private equity firms of various sizes and regional focus responded. Basic information on covenants Covenants are ancillary contractual obligations with which the borrower is bound as part of the loan agreement. Two types of covenants can be distinguished: Non-financial covenants and financial covenants. Non-financial covenants are primarily aimed at ensuring that the borrower cannot take any actions that reduce the value of the loan to the creditor. They include, for example, assurances by the borrower to obtain the creditor's consent for certain profit distributions or planned investment projects. This means that the operational use of liquidity surpluses can be better controlled. The lender's required declaration of consent to restructuring transactions protects it against an unwanted change in the capital structure. Other objectives of non-financial covenants are to improve the lender's information position about the borrower or to allow the lender regular insight into company data. 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