covenant
noun
, ˈkə-və-\
Definition of covenant
(Entry 1 of 2)
covenant
verb
, -ˌnant, ˈkə-və-\
Definition of covenant (Entry 2 of 2)
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Other Words from covenant
Noun
\
adjective
Synonyms & Antonyms for covenant
Synonyms: Noun
accord, alliance, compact, convention, pact, treaty
Synonyms: Verb
Antonyms: Verb
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Examples of covenant in a Sentence
Noun
an international covenant on human rights The restrictive covenants of the building development prohibit the construction of buildings over 30 feet tall.Verb
a traditional rule held that a husband could not enter into a covenant with his wife, because that was the equivalent of covenanting with himself the home buyers had to covenant that they would restore and keep the house for at least 10 years in exchange for a low mortgage rate
Recent Examples on the Web: Noun
As the biblical reference suggests, the film explores the treacherous dimensions of a worship community bound by a deadly covenant. — Travis Deshong, chicagotribune.com, "‘Them That Follow’ review: A pastor’s daughter reveals a secret that wreaks havoc on congregation," 10 Aug. 2019 However, all were legally structured as commercial condominiums, with covenants prohibiting shelters, according to Barry Curtis, the city’s director of economic and development services. — Hillary Davis, Daily Pilot, "Permanent Costa Mesa homeless shelter may get needed zoning tweak," 13 Aug. 2019 That includes looking over the HOA’s covenants, conditions, and restrictions, or CC&Rs. — Janna Herron, USA TODAY, "Buying a home? There's a good chance you'll deal with HOAs, so here's what you should know," 6 Aug. 2019 There was, instead, a long legacy of policy decisions (restrictive covenants, redlining) and informal norms that had created a stark pattern of residential segregation. — Matthew Yglesias, Vox, "Democratic candidates’ school integration plans, explained," 3 July 2019 By the early 1930s, restrictive housing covenants, the evolving racial makeup of certain neighborhoods, and actions by the school board had begun to push in the opposite direction toward more segregation. — Mark Stryker, Detroit Free Press, "'Jazz from Detroit': Exclusive excerpt from new book about city's remarkable jazz legacy," 30 June 2019 Or was Buzz the one astronaut sensitive enough to detect that some sacred covenant between man and humanity, Earth and the heavens, had been irrevocably violated that summer? — Rachel Slade, BostonGlobe.com, "50 years ago, we walked on the moon but we’re still not sure why," 28 June 2019 It's taken 25 years to create a set of policies, a set of covenants, a set of rules. — Ira Winderman, sun-sentinel.com, "Pat Riley on Udonis Haslem’s Heat future, ‘He told me that he’s not finished yet with these guys’," 23 June 2019 Storage has been a problem in some subdivisions with covenants prohibiting big cans visible from the street. — Lee Roop | [email protected], al, "’Work with us, have patience’ says Huntsville’s new recycling program," 2 Aug. 2019Recent Examples on the Web: Verb
USA TODAY NETWORK LOS ANGELES — Alien: Covenant edged out Guardians of the Galaxy Vol. 2 in a weekend space battle at the box office. — Sandy Cohen, USA TODAY, "'Alien: Covenant' edges out 'Guardians 2' at weekend box office with $36M," 21 May 2017These example sentences are selected automatically from various online news sources to reflect current usage of the word 'covenant.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
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More Definitions for covenant
covenant
nounFinancial Definition of covenant
How It Works
Covenants are most common in lending agreements and bond indentures. They can be financial or operational in nature.
Operational covenants often require borrowers to maintain their physical assets to certain standards, meet minimum disclosure requirements, engage only in permissible business lines, or maintain a certain level of insurance.
Financial covenants are frequently ratios that the borrower is required to stay above or below (a 2:1 debt-to-equity ratio or interest coverage ratio, for example), but there are usually also restrictions on debt levels and minimum working capital requirements. Financial covenants often limit the borrower's purchase of new assets, changes in control, the use of the borrowed funds, and the payment of dividends (so that shareholders cannot vote to pay themselves huge dividends, leaving nothing for the creditors). Some may also limit compensation packages for officers.
The lending agreement in which the covenant appears will also provide detailed formulas to be used to calculate the ratios and limits. It is important to note that in many cases these formulas do not conform to generally accepted accounting principals (GAAP). For example, the covenant may include leases in the debt calculation, or it may consider capital leases as an expense. As a result, it is very important that borrowers scrutinize covenants before borrowing.
Violating a covenant can trigger a technical default. This means that although the issuer is making interest and principal payments on time, it is not operating within the agreed-upon guidelines and is thus increasing the risk of default in the eyes of the lender or bondholders. Often borrowers have a certain amount of time to remedy the technical default, but it often lowers the borrower's credit rating and stock price.
Why It Matters
Lenders attach covenants to bond issues and loans as a way to force the borrower to operate in a financially prudent manner that ensures it will repay the debt. Issuers, on the other hand, usually negotiate the most flexible covenants they can so they have the freedom to make decisions and take risks that might ultimately benefit the shareholders. In either case, covenants act as a safety mechanism that allows both parties to achieve its goals.
Source: Investing Answers
covenant
noun
English Language Learners Definition of covenant
See the full definition for covenant in the English Language Learners Dictionary