Covenant

Definition:

A promise in an agreement that is binding on the party providing the Covenant. An Affirmative Covenant places an obligation on the giver to do something, a Negative Covenant places an obligation on the giver to refrain from doing something and a Maintenance Covenant places an obligation on the giver to maintain something.

In the context of debt offerings and debt finance, the issuer or borrower, breaching its Covenants might trigger the materialization of certain rights for the bondholders or lenders, such as entitlement to full repayment on demand.

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