Structuring and Negotiating Financial Covenants in Corporate Debt Arrangements

Abstract

A Covenant, in general, is a promise undertaken by a company to its lenders or bondholders. Covenants are either operational or financial. This dissertation focuses mainly on financial covenants, which are commonly included in bonds and loan agreements in order to safeguard creditors' interest. Debt agreements with Financial covenants might sometimes be appealing for borrowing firms as they offer better credit facilities that are not usually found in normal debt contracts. However, everything has its price and violating financial covenants might have adverse implications on the future operation of the company, it is, therefore, important to understand how this clause is structured and negotiated. Moreover, the dissertation looks into recent developments and explores whether financial covenants are capable of being included in Smart Contracts.