A Financial Covenant which is only tested in case a certain condition (Springing Test) is met.

A typical construct in Revolving Credit Facilities which accompany a Broadly Syndicated Loan, a High Yield Bond or sometimes a Private Credit facility. The Springing Test generally refers to at least 30-50% of the Revolving Facility being drawn on the test date.

See also: Financial 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.