Debt Covenant Law and Legal Definition

Debt Covenant is one of many terms used to describe rules governing the loans that a company has outstanding. Debt covenants, also called banking covenants or financial covenants, are agreements between a company and its creditors that the company should operate within certain limits. Debt covenants are agreed as a condition of borrowing. They may be changed if debt is restructured. Breach of a debt covenant usually allows creditors to demand immediate repayment.