Financial Times FT.com

How the loan restrictions are determined

By Paul J Davies

Published: May 17 2007 03:00 | Last updated: May 17 2007 03:00

Covenants are the restrictions that lenders place on borrowers to help ensure that they get their money back.

Typically they take the form of maintenance covenants, which describe regular (often quarterly) tests that a business has to pass in order not to be in default, when banks and other investors can demand their money back or push for a restructuring.

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