Providers of debt finance often insist on covenants being entered into when providing debt finance for companies.
Agreement and adherence to the specific covenants is often a condition of the loan provided by the lender.
Which THREE of the following statements are true in respect of covenants?
A . Covenants are entered into to penalise the company.
B . Covenants are entered into to give the lender added protection on the loan extended to the company.
C . Covenants are entered into to impose financial discipline on the company.
D . Covenants enable the lender to demand immediate repayment or to renegotiate terms if it is breached.
E . Covenants are entered into to eliminate the tax liability of the company.
Answer: B,C,D
Explanation:
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