Breach Of Covenant Research Articles

Financial Performance Analysis of PT XYZ and Compliance Of Financial Loan Covenant Toward Debt Repayment Capability

In 2022, PT XYZ faced a decline in net sales of -16.42%. At the same time, Indonesia's furniture industry also faced a decline in export value. This research analyses PT XYZ's financial performance from 2018 to 2022, specifically regarding its debt repayment capability. Financial ratios from several aspects, such as profitability, liquidity, activity, and solvency ratios, will be generated to reflect the firm's performance and trend in the past five years. Other than evaluating the firm's financial ratios, this research will also evaluate the firm's compliance with financial loan covenants in existing bank loans and bond issuance. From the financial ratio analysis, the firm's performance plummeted in 2022, mainly due to the decline in sales experienced by PT XYZ. There may be some issues regarding the firm's liquidity performance. However, it can be seen from the solvency ratios such as DSCR and Interest Coverage Ratio that the firm can still meet its obligations in paying its debt interest and principal payments. Compliance with financial loan covenants indicates a covenant breach in the debt-to-EBITDA ratio, which is applied as a financial loan covenant by Bank DEF and Bank JKL. However, the firm can still pay its debt principal and even pay off the credit facilities. The research found that the decline in sales faced by the firm significantly impacted the firm's weakened financial performance in 2022. Regarding compliance with financial loan covenants from bank loans and bond issuance, the covenant breach does not affect the firm's capability in debt repayments.

Financial Covenants, Firm Financing, and Investment

Firms reduce investment to avoid costly violations of financial covenants, most of which are based on earnings. Empirically, I show that a 25% drop in earnings implies a 15% decrease in investment for the median listed US firm due to the reduced distance to the covenant threshold. To quantify this precautionary effect of covenants in the aggregate, I incorporate earnings covenants into a heterogeneous firm model with a financial sector. Firms in the model are uncertain about the bank’s reaction to a covenant breach and therefore reduce debt issuance and investment when approaching the covenant threshold. In the model, covenants reduce aggregate investment by 14% relative to a benchmark economy without limits on borrowing, where the precautionary effect of covenants accounts for most of the decrease.

Debt covenant slack and ex-post conditional accounting conservatism

This study examines how conditional accounting conservatism varies after debt contracts are executed (ex-post conditional conservatism) depending on the closeness to violations of debt covenants, the costs of covenant violations, and bank monitoring. I hypothesise that borrowers with lower debt-covenant slack have an incentive to avoid covenant violations and will have lower ex-post conditional conservatism levels than those with higher slack. I find that borrowers with both lower and higher slack increase their ex-post conditional conservatism, but that the magnitude of this increase in conservatism is positively associated with the level of covenant slack. Further, this positive relationship between the ex-post change in conditional conservatism and the debt-covenant slack is more pronounced when the costs of the debt-covenant breach are greater, and is less pronounced when lenders have stronger incentives to monitor borrowers. This study provides evidence that the ex-post change in conditional conservatism is affected by the costs of a covenant breach and bank monitoring.

The transformation of the city of Zion: From decadence to justice and prophetic hope (Is. 1:1–2:5)

This article focuses on the story of the transformation of the city called Zion. Isaiah 1:1–2:5 is the key to the book. This chapter describes the failure of Israel to be the people of God: Israel’s covenant breach, a corrupted cult and imminent punishment. It tells of the existence of two groups within Israel: the righteous remnant who would be saved and the wicked who would be judged. This chapter furthermore presents the reader with a picture of decadent Jerusalem whose sacrifices are rejected and whose prayers are no longer accepted. Isaiah 1 contains a warning of judgement against Jerusalem, whereas Isaiah 2:1–5 sketches the prophetic hope for Zion, which would lead to a pilgrimage of the nations to receive the Torah on Zion.

Law, Religion, and Feeling Included/Excluded: Case Studies in Canadian Religious Freedom Litigation

Abstract Based on a small qualitative study of three religious freedom cases, this article uses litigant narratives as springboards for reflection on the theme of inclusion in the Canadian political community. The article attends to the affective dimension of inclusion, focusing on whether participants felt included or excluded. Successful litigants told narratives of Canada as a country in which they could be included in public life without forgoing their religious practices. The narratives of unsuccessful litigants were more complex. These particular litigants did not have a desire to participate in public practices and institutions. Rather, their narratives understood religious freedom on a contractual basis, portraying their loss in court as a breach of covenant. Moreover, though these narratives contained themes of rejection and exclusion, participants said that they had faith enough in their eventual success that they would stay in Canada rather than emigrate.

Interim dilapidations

This paper examines the issues associated with taking action against a tenant for failure to comply with covenants relating to the physical condition of leased property. It will cover the options available to a landlord, including forfeiture and re-entering and undertaking works (Jervis v Harris). It is almost impossible for a tenant to be fully compliant throughout their entire lease term. Commercial leases in the UK are a unique form of contract in that regard. The lease is almost always in breach; it is just a question of whether the conditions are suitable to enforce the breaches. With this backdrop the paper will explore the following: why tenants fail to maintain buildings properly; why landlords make claims during the lease; which covenants can be enforced; and ways of enforcing a breach of covenant. It ends with suggesting some practical steps and likely future initiatives.

EQUITY’S JURISDICTION TO RELIEVE AGAINST FORFEITURE OF LEASES – AN HISTORICAL PERSPECTIVE

This article seeks to trace the evolution of equity’s jurisdiction to relieve against the forfeiture of leases from the early 17th century cases through to the present day. Although the celebrated case of Sanders v Pope, decided in 1806, marked a trend towards a more flexible (discretionary) approach to equitable relief, this was to be short lived following Lord Eldon’s judgment in Hill v Barclay in 1811 declining to grant relief against forfeiture of a lease for a wilful breach of covenant not involving the failure to pay rent even where the same was capable of adequate compensation. This remained the position until 1973, when the House of Lords in Shiloh Spinners Ltd v Harding took the opportunity to review the whole question of the scope of equity’s jurisdiction to relieve against forfeiture. What emerged was a principled approach to the grant of equitable relief which was not limited to the two orthodox heads of relief: (a) where the right to forfeit was inserted by way of security for the payment of rent nd (b) where the breach had been occasioned by fraud, accident, mistake or surprise. The Shiloh ruling paved the way for the granting of relief for breaches of other covenants in the same way as that in the case of rent, namely, to prevent a forfeiture where the landlord may be adequately compensated and receive proper undertakings as to future performance, so that the forfeiture clause is merely security to achieve these results.

The effect of corporate board characteristics on loan monitoring decisions

Motivated by a paucity of research into the impact of corporate governance from a debtholder perspective, we examine the impact of corporate governance on loan monitoring decisions. The active and close involvement of a major UK bank facilitated the development of extremely realistic experimental scenarios with a great deal of accurate institutional detail. The results show that the likelihood of loan officers increasing the level of monitoring in the context of a debt covenant breach is associated with board independence, director financial expertise and the presence of a blockholder. A two-way interaction between financial expertise and board independence is also documented. Since likelihood of debt covenant breaches continues to be an important variable in studies of accounting choice and corporate finance the paper provides insights into associated debt contracting costs and their determinants. Apart from extending the academic literature, this study provides additional evidence on the efficacy of good corporate governance in reducing debt contracting costs that should also be of interest to regulators and practitioners

Risk analysis with contractual default. Does covenant breach matter?

Mergers and acquisitions (M&A), private equity and leveraged buyouts, securitization and project finance are characterized by the presence of contractual clauses (covenants). These covenants trigger the technical default of the borrower even in the absence of insolvency. Therefore, borrowers may default on loans even when they have sufficient available cash to repay outstanding debt. This condition is not captured by the net present value (NPV) distribution obtained through a standard Monte Carlo simulation. In this paper, we present a methodology for including the consequences of covenant breach in a Monte Carlo simulation, extending traditional risk analysis in investment planning. We introduce a conceptual framework for modeling technical and material breaches from the standpoint of both lenders and shareholders. We apply this framework to a real case study concerning the project financing of a 64-million euro biomass power plant. The simulation is carried out on the actual model developed by the financial advisor of the project and made available to the authors. Results show that both technical and material breaches have a statistically significant impact on the net present value distribution, and this impact is more relevant when leverage and cost of debt increase.

Accounting-Based Valuation, Taxation and Optimal Leverage

This theoretical study presents residual income valuation formulae that account for the firm's credit risk and investors' personal taxation. The formulae can determine optimal financial leverage and the value of accounting based debt covenants. The firm's default may be triggered by breach of covenants or be spontaneously chosen by equity holders, depending on accounting numbers. Credit risk makes valuations sensitive to investors' personal taxation.

The Effect of Corporate Board Characteristics on Loan Monitoring Decisions

Motivated by a paucity of research into the impact of corporate governance from a debtholder perspective, we examine the impact of corporate governance on loan monitoring decisions. The active and close involvement of a major UK bank facilitated the development of extremely realistic experimental scenarios with a great deal of accurate institutional detail. The results show that the likelihood of loan officers increasing the level of monitoring in the context of a debt covenant breach is associated with board independence, director financial expertise and the presence of a blockholder. The two-way interaction between financial expertise and board independence is also documented. Apart from extending the academic literature, this study provides empirical evidence on the efficacy of good corporate governance in reducing debt contracting costs that should also be of interest to regulators and practitioners.

THE BITCH HAD IT COMING TO HER: Rhetoric and Interpretation in Ezekiel 16

AbstractEzek. 16:35-43 describes the punishment invoked upon personified Jerusalem for breach of covenant. Virtually all modern scholars maintain that the description is modelled on real life punishments for adultery in ancient Israel. This paper argues that the role played by Jerusalem's metaphoric lovers, who participate in the punishment rather than, as adulterers themselves, being subject to it, proves that the dominant interpretation of the passage is untenable. The paper proposes that the rhetorical dynamics of the passage have been a powerful influence in leading scholars to maintain this demonstrably false position. This proposal is illustrated by examining how scholars focus their ire solely on personified Jerusalem as adulteress, while at the same time exonerating the male lovers. Interpreting the punishment in this fashion conforms to the passage's rhetorical strategy of creating a unified, male-identified subject position that uses sexual difference to focus the reader's fury solely on the woman. The text accuses personified Jerusalem of the covenant infractions of apostasy and im68 proper foreign alliances, and invokes punishments that are standard for these crimes. The commentators, on the other hand, deleteriously influenced by the rhetorical dynamics of the passage, put personified Jerusalem to death for the enormity of her sexual offenses. This inappropriate literalizing of the sexual language of the vehicle of the metaphor has resulted in an erroneous interpretation of the passage.

ADULTEROUS JERUSALEM'S IMAGINED DEMISE: DEATH OF A METAPHOR IN EZEKIEL XVI

AbstractScholars typically assert that the punishment section of Ezekiel xvi includes several features that accurately depict the appropriate and lawful punishment for adultery in ancient Israel. This article refutes the standard scholarly interpretation in two ways. First, it demonstrates that the standard interpretation is based on a flawed understanding of the nature of metaphor. It concludes that, although scholars claim that they are reading metaphorically, in fact they are taking the language literally. Secondly, it reviews all of the biblical and extrabiblical evidence cited by scholars in support of asserting that four of the features of the depicted punishment reflect the lawful punishment for adultery. It concludes that the evidence cited does not support the assertion. Rather, the punishment depicted draws upon consequences threatened for breach of covenant, which is the transgression that the people of Jerusalem are accused of committing in Ezekiel xvi.

‘Drive out the wicked person’ A Biblical Theology of Exclusion

This article attempts to treat the exclusion of individuals from the community as a topic of biblical theology. It focuses on the neglected rationale or motives of exclusion rather than the practicalities of exclusion (i.e., who gets excluded? in what way? for which sins? by whom?). Five motifs or images serve as lenses to focus and guide the reading of the relevant texts and assist in the task of synthesis. In sum, serious offenders are excluded because of the solidarity of the community, in order to maintain the holiness of the group, due to a breach of covenant, in the hope of restoration and because of the prospect of salvation. By way of conclusion some reflections are offered on the relevance of this teaching for biblical theology in general and for the practice of church discipline today.

Remedies for breach of covenant: right of re-entry

Remedies for breach of covenant: right of re-entry

Financial Ratio Covenants in UK Bank Loan Contracts and Accounting Policy Choice

Abstract The attitudes of lending bankers to the use of restrictive ratio covenants in loan contracts are of importance to both corporate management and accounting policy makers. Such attitudes also underly research linking costly contracting with accounting policy choices. This paper reports a survey of 33 UK lending bankers. It analyses their views on (a) the extent of ratio covenants in UK bank loan contracts and factors with which their presence is most likely to be associated; (b) costs that may be imposed on borrowers violating such covenants or expecting to do so; and (c) the ability of borrowers to avoid such costs by appropriate choice of accounting methods. Respondents indicated that ratio covenants are widely used, particularly for loans in excess of £1 million and with companies that are relatively highly geared. ‘High cost’ penalties such as loan acceleration are most likely to be adopted where no prior warning has been given of a covenant breach. Where prior warning has been given, or where ...

Forfeiture and peaceable re‐entry: a review of recent developments

Asks when it is possible to forfeit the property lease for breach of covenant. Considers the rules and limitations under which this right may be exercised in the light of a recent decision made by a Court of Appeal. Argues that this decision represents little more than a papering over archaic and arbitrary rules. Advocates the programme of reforms recommended by the Law Commission.

The Nuer Concept of Covenant and Covenantal Way of Life

The Nuer have a strong covenantal tradition but without the “federal” political apparatus associated with two or more “levels” of “government” in a federal system of government. There are important features of Nuersociety pertaining to ideas of covenant, breach of covenant, and reestablishing the bonds of covenantal relationships that have important implications for all covenanting societies. The way they think about themselves, their relationships with each other, and their relationships with the larger world, are essential elements in what constitutes their way of life.

BREACH OF COVENANT: TENANTS' REMEDIES

The purpose of this paper is to review briefly the remedies open to the tenant where the landlord is in breach of covenant, with particular reference to some of the more recent case law in this field. The law is stated as it is believed to be up to 1st July, 1988.

BREACH OF COVENANT: LANDLORDS' REMEDIES

The purpose of this paper is to review briefly the main remedies open to the landlord where the tenant is in breach of covenant and, in the process, both to consider some of the problems which may be encountered in this connection and to look at some of the more recent case law in this field. A subsequent paper will deal with the same general area of the law from the point of view of the tenant seeking to take action to enforce performance of the landlord's covenants. The law is stated as it is believed to be up to 1st May, 1988.