Which THREE of the following statements are true in respect of covenants?


Providers of debt finance often insist on covenants being entered into when providing debt finance for companies.

Agreement and adherence to the specific covenants is often a condition of the loan provided by the lender.

Which THREE of the following statements are true in respect of covenants?
A . Covenants are entered into to penalise the company.
B . Covenants are entered into to give the lender added protection on the loan extended to the company.
C . Covenants are entered into to impose financial discipline on the company.
D . Covenants enable the lender to demand immediate repayment or to renegotiate terms if it is breached.
E . Covenants are entered into to eliminate the tax liability of the company.

Answer: B,C,D

Explanation:

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