Definition for : Restrictive covenant

Restrictive covenant is a clause that the creditors impose on Shareholders so that the latter cannot increase the creditors' Risk. These clauses force management / Shareholders to approach creditors to renegotiate loan agreements if they wish to exceed the limits set in the restrictive Covenants. See also Rendez-vous clause.

(See Chapter 35 Working out details: The design of the capital structure of the Vernimmen)

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