Covenant Breach
Short definition
A covenant breach is a break of a financial or non-financial undertaking. It can be an automatic default or a default after notice and cure; draws stop, the rate may step up, debt may accelerate.
Detailed explanation
The event-of-default list splits covenant breach, payment default and cross-default. A technical miss (late information) is not a payment miss, but the pack may send both through the same door.
Breach shuts unused limit; liquidity headroom dies on paper. Without a waiver or equity cure, refinancing and supplier confidence break together.
Why it matters for the CFO
Breach day is a cash and legal problem, not an accounting one. The 13-week plan zeros drawability.
How to read it
Negative headroom = breach (on the test date). An intra-period forecast is not a breach; it is still spoken early.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.