Difference between revisions of "Loan Covenants"
(Created page with "== Definition == '''Loan Covenants''' are a collection of possible clauses in a bilateral Loan contract which typically aim to mitigate Credit Risk for the lender. ==...")
Revision as of 21:23, 7 November 2019
Covenants can take any agreed shape and may reflect the specific circumstances of the lending relationship, the project being financed etc.
- Loan to Value (LTV) is the ratio of a loan to the value of the collateral purchased
- Interest Coverage Ratio (ICR) is the ratio of earnings before interest and tax to the interest expense in the same period
- Debt Service Coverage Ratio (DSCR) is the ratio of annual net operating income to debt obligations owed in the last 12m
The triggering of a loan covenant means the terms of the loan repayment are accelerating and may be placing other legal restrictions on the possible actions of the borrower