Affirmative and Negative Loan Covenants: Customizing Obligations and Restrictions Specific to the Transaction

This CLE webinar will take a deep dive into affirmative and negative covenants in loan agreements that are designed to preserve the creditworthiness of the borrower and protect the lender against downside risk. The panel will review the language and purpose of commonly used affirmative and negative covenants and provide negotiating and drafting strategies for borrowers and lenders relating to these loan terms.

When entering into a loan agreement, lenders must determine what negative and affirmative covenants are important to ensure the borrower will continue to be able to repay the loan. Borrowers must also understand the nuances of these covenants to avoid issues in complying with these terms down the road.

Affirmative covenants are activities the borrower should do to maintain the financial health and well-being of the business and allow the lender to stay informed on the business' performance. Negative covenants are designed to prevent borrowers from taking actions that put their creditworthiness at risk, such as incurring additional debt or selling assets.

It is important for borrowers and lenders to carefully consider and understand what affirmative and negative covenants to include in a loan agreement rather than simply relying on stock or boilerplate terms. Counsel representing borrowers and lenders should design these terms and any exceptions or carveouts to accommodate the specific circumstances of each transaction.

Listen as our authoritative panel reviews common affirmative and negative covenants in loan agreements and best practices for negotiating and drafting these terms to meet the circumstances of various types of transactions.