2.4.5 Covenants

2.4.5 Covenants

A covenant is a promise or agreement made by a party for the benefit of another. Covenants include “affirmative covenants,” agreements to take specified actions, and “negative covenants,” agreements to not take specified actions or allow those actions to occur. Most covenants are made by the public agency borrower for the benefit of the debt holders or creditor liquidity facility providers. Issuer covenants in bond documents fall into four broad categories:

1. Debt covenants relating specifically to the debt obligation
   
   
2. General financial covenants relating to the issuer’s general financial management
   
   
3. Property covenants relating to specific property securing or generating revenues necessary to pay the debt
   
   
4. System covenants relating to the finances and operations of the issuer’s enterprise system