Covenant Advisory

Covenant breaches can result in significant costs for borrowers. Learn how we can help you mitigate those risks.

Reporting of financial covenants under credit agreements has become the subject of greater scrutiny for both borrowers and lenders, with covenant breaches resulting in significant costs for borrowers. PwC’s Covenant Advisory team can help you mitigate those risks during the entire covenant lifecycle through a borrower-focused approach.

The value we bring:

  • Creating headroom for future reporting
  • Providing market perspective on covenant terms
  • Mitigating the risk of covenant breach through inappropriate drafting rather than business performance
  • Identifying scope to take advantage of the flexibility and ambiguities within the covenant drafting
  • Buying time so borrowers can renegotiate covenants before having their bargaining position weakened through a covenant breach

PwC can help you throughout the covenant lifecycle

Negotiation and Refinancing

When borrowers are negotiating covenants we:

  • advise on the proposed covenant drafting to ensure it reflects the underlying assumptions of the financial model and the borrower’s existing accounting practices and business circumstances
  • help establish robust drafting to protect the borrower’s position on the covenants and where required, helping the borrower articulate its position in the negotiations with the lender

Initial reporting under covenants

When reporting covenants for the first time we can help borrowers to:

  • develop reporting practices that are in line with the covenant requirements
  • understand the range of accounting treatments and interpretations permissible under the covenant drafting to take advantage of any flexibility and ambiguity

When covenant headroom tightens

Where covenant headroom is tightening we can help borrowers to:

  • assess previously reported covenant calculations to identify reporting practices and interpretations that are not in line with the covenant drafting
  • identify potential interpretations, flexibility and ambiguities within the covenant drafting and scope for the borrower to take advantage of these