Contractual obligation between a borrower and its financing providers. Covenants represent a list of actions which the borrower is allowed and is not allowed to do during the life of the debt facility.

The level of restrictiveness of covenants varies widely across different facilities (loans and bonds).

See also Financial Covenant, Incurrence Covenant, Affirmative Covenant, Negative Covenant.

You can learn more about the covenant package and all the protections for High Yield Bonds and Leveraged Loans in our webinar reply Learn more about covenants in our Legal Primer: Safeguarding Credit Quality and Asset Value.