Maintenance Covenant
Short definition
A maintenance covenant requires the ratio to stay inside the cap/floor every test period (usually quarterly). A breach can occur with no deal; it is the standard bank-loan regime.
Detailed explanation
The difference from incurrence is continuity. Headroom is a quarterly KPI. A holiday delays the first test date; after that every period binds.
If the budget is not built to the maintenance test, the mid-year conversation is a waiver.
Why it matters for the CFO
It buys continuous discipline and an early warning. The price is less flexibility.
How to read it
A quarterly test needs tighter headroom than an annual average; season can break the ratio in one quarter.
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Definitions are educational. They are not investment, credit or tax advice.