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Historically, upkeep tests had been connected with leveraged loans and incurrence tests with investment-grade loans and bonds. Now, the development of covenant-lite loans (see above) has blurred the line.
In a loan that is traditional, as a borrower’s risk increases, monetary covenants be more tightly wound and substantial. Generally speaking, you will find five forms of monetary covenants – coverage, leverage, present ratio, concrete web worth, and maximum money expenses: