A crash course on covenants

Covenants are a core source of investor protection in sub-investment grade bonds and loans, shaping what companies can - and can’t - do. This course explains how the most important covenants work, and how to assess the risks they create for investors. Across three lessons, we cover:

• Junk debt: what it actually is, why it’s a concern, and how covenants may offer investors certain protections
• Debt and liens covenants: the differences between the two, basket types, and the complex world of structural subordination
• The restricted payments covenant: its purpose, types of baskets, limitations, whether dividends can be made, plus a look at investment capacity