Debt Covenant
/ˈdɛt ˈkʌvənənt/
Definitions
- (n.) A clause in a loan agreement that imposes limits or obligations on the borrower to protect the lender's interests.
The debt covenant required the company to maintain a minimum debt-to-equity ratio.
Forms
- debt covenant
- debt covenants
Related terms
See also
Commentary
Debt covenants are critical in loan documentation as they safeguard lenders by restricting borrower actions or financial metrics; precise drafting avoids ambiguity and enforcement issues.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.