Covenant-Lite
Investment Banking glossary · Restructuring (RX), DCM, & ECM
Definition
Loans with incurrence covenants only (no quarterly maintenance tests).
Covenant-Lite in plain English
Covenant-lite ("cov-lite") loans are the relaxed cousins of normal loans: they skip the recurring quarterly "report card" tests and only impose rules when the borrower tries to do something specific, like take on more debt. Think of it as a gym membership with no monthly weigh-ins — nobody checks on you unless you try to add a big new commitment. Borrowers love them because they get more breathing room and less risk of tripping a technical default during a rough patch, while lenders take on more risk because problems can build quietly before anyone is forced to act.
Learn these first
Related Investment Banking terms
Investment Banking practice questions · Investment Banking flashcards · Investment Banking study guide