covenant

noun
cov·​e·​nant | \ ˈkəv-nənt How to pronounce covenant (audio) , ˈkə-və- \

Definition of covenant

 (Entry 1 of 2)

1 : a usually formal, solemn, and binding agreement : compact … international law, which depends upon the sanctity of covenants between rulers.— George H. Sabine
2a : a written agreement or promise usually under seal between two or more parties especially for the performance of some action the deed conveying the land contained restrictive covenants
b : the common-law action to recover damages for breach of such a contract

covenant

verb
cov·​e·​nant | \ ˈkəv-nənt How to pronounce covenant (audio) , -ˌnant, ˈkə-və- \
covenanted; covenanting; covenants

Definition of covenant (Entry 2 of 2)

transitive verb

: to promise by a covenant : pledge

intransitive verb

: to enter into a covenant : contract

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Other Words from covenant

Noun

covenantal \ ˌkə-​və-​ˈnan-​tᵊl How to pronounce covenantal (audio) \ adjective

Synonyms & Antonyms for covenant

Synonyms: Noun

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
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Recent Examples on the Web: Noun We are entered into covenant with Him for this work. Kevin D. Williamson, National Review, "This Pilgrim Republic," 28 Nov. 2019 Under the terms of covenants attached to the refinancing, any future dividend payments will be significantly reduced unless Casino can substantially cut its leverage. Washington Post, "Casino Gets a Short Leash," 23 Oct. 2019 Now, many of those affordability covenants are set to expire. Steve Lopez, latimes.com, "Evictions loom for Chinatown residents who can’t find affordable housing," 22 June 2019 Exclusionary covenants, legal clauses written into property deeds, prohibited people of certain races, specifically African Americans and people of Asian descent, from purchasing homes. oregonlive, "Historically racist housing policies exacerbating climate change effects in low-income Portland neighborhoods," 20 Jan. 2020 With markets awash in money, investors are lending money while getting weaker protections, known as covenants, in return. John Detrixhe, Quartz, "Risky corporate debt is piling up, out of sight from global regulators," 7 Jan. 2020 Now pull it all together: restrictive covenants, POA bylaws, POA minutes and the statutes. Dallas News, "Reining in Your POA," 6 Jan. 2020 Once the issuer violated the covenants, then creditors could demand repayment of their principal immediately. Larry Light, Fortune, "A Decade After the Financial Crisis, Corporate Finance Must Contend with These New Ticking Debt Time Bombs," 29 Dec. 2019 Township covenants only allow a motor vehicle to be parked on a township street for 48 consecutive hours before it must be moved to a new location. Jeff Forward, Houston Chronicle, "Residents ask Woodlands Development Standards Committee for help with machinery noise," 10 Jan. 2020 Recent 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 2017

These 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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First Known Use of covenant

Noun

14th century, in the meaning defined at sense 1

Verb

14th century, in the meaning defined at transitive sense

History and Etymology for covenant

Noun and Verb

Middle English, from Anglo-French, from present participle of covenir to be fitting, from Latin convenire

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Time Traveler for covenant

Time Traveler

The first known use of covenant was in the 14th century

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Statistics for covenant

Last Updated

13 Feb 2020

Cite this Entry

“Covenant.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/covenant. Accessed 18 Feb. 2020.

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More Definitions for covenant

covenant

noun

Financial Definition of covenant

What It Is

A covenant is a promise a company makes, usually in return for a loan or bond issue.

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
How to pronounce covenant (audio)

English Language Learners Definition of covenant

formal : a formal and serious agreement or promise
law : a formal written agreement between two or more people, businesses, countries, etc.

covenant

noun
cov·​e·​nant | \ ˈkə-və-nənt How to pronounce covenant (audio) \

Kids Definition of covenant

: a formal or serious agreement or promise the covenant of marriage

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covenant

noun
cov·​e·​nant | \ ˈkə-və-nənt How to pronounce covenant (audio) \

Legal Definition of covenant

1 : an official agreement or compact an international covenant on human rights
2a : a contract in its entirety or a promise within a contract for the performance or nonperformance of a particular act a covenant not to sue specifically : a promise relating to the transfer, possession, or ownership of real property — see also covenant not to compete, restrictive covenant
b : a warranty in a deed assuring the grantee especially against defects in title a covenant for quiet enjoyment — see also run
3 : a common-law action to recover damages for breach of a contract under seal — compare assumpsit, debt

Other Words from covenant

covenant verb

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Comments on covenant

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