easy · Private Credit & Debt documentation-covenants-terms
Why do private credit lenders typically prefer 'Maintenance Covenants' over 'Incurrence Covenants'?
- They are only tested when the borrower decides to pay a dividend or make an acquisition.
- They allow the borrower to take on more debt without ever notifying the lender.
- They act as an early warning system by testing financial health every quarter regardless of borrower action.
- They guarantee that the company's EBITDA will never decrease.
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