Covenant Monitoring¶
Overview¶
Covenant monitoring ensures portfolio companies maintain compliance with financial and operational agreements, protecting investor interests and identifying potential issues early.
Covenant Types¶
Financial Covenants¶
Numeric thresholds:
- Leverage ratios
- Coverage ratios
- Liquidity metrics
- Performance targets
Operational Covenants¶
Business requirements:
- Reporting obligations
- Insurance requirements
- Key person provisions
- Business restrictions
Monitoring Process¶
Compliance Tracking¶
Systematic oversight:
- Regular testing
- Threshold monitoring
- Trend analysis
- Early warning system
Breach Management¶
Issue Resolution¶
Addressing violations:
- Breach identification
- Impact assessment
- Remediation planning
- Waiver negotiation