Covenant in a loan or bond agreement mandating certain actions which the borrower or issuer is restricted from doing during the life of the facility.
Eg: Debt incurrence (beyond a certain limit), payment of dividends (above pre-agreed thresholds), Sale of certain assets, etc

See also: Affirmative Covenant

Learn more about covenants in our Legal Primer: Safeguarding Credit Quality and Asset Value. In this webinar, Apostolos Gkoutzinis, Head of EMEA Capital Markets and Co-Head of European Leveraged Finance, Milbank LLP will run a session on the principal techniques to safeguard the restricted group in leveraged finance and high-yield documentation.