covenant

noun

cov·e·nant | \ ˈkəv-nənt

, 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

, -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

Other Words from covenant Synonyms & Antonyms More Example Sentences Learn More about covenant

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Synonyms & Antonyms for covenant

Synonyms: Noun

accord, alliance, compact, convention, pact, treaty

Synonyms: Verb

agree, bargain, contract

Antonyms: Verb

disagree

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

Those covenants were put in place because citizen groups were concerned about the sale of a nonprofit to a for-profit. — David Jesse, Detroit Free Press, "DMC, Wayne State fight for years with millions of dollars and care of poor at stake," 20 June 2019 For example, lenders can build covenant mechanisms into their loans to trigger cash flow sweeps that would help them de-leverage, said Denise Colletta, senior VP and team leader in the City National Bank entertainment division. — Ed Christman, Billboard, "Future Looks Bright in Streaming Age, Say Wall Street Experts at AIMP Indie Music Publishing Summit," 11 June 2019 Less mature markets, oddly, are starting to look safer: taking no chances, funds lending there insist on robust covenants. — The Economist, "Buy-out firms are the new banks in emerging markets," 14 June 2019 As Refinitiv marketed its bonds, analysts warned its covenants would likely lower the bar for future deals. — Soma Biswas, WSJ, "The Case of the Disappearing Collateral," 15 Nov. 2018 Electric truck and drone developer Workhorse Group Inc. reached a deal with lender Marathon Asset Management LP to relax financial covenants on a $35 million financing package as the company tries to meet demand for its vehicles. — Andrew Scurria, WSJ, "Struggling Electric Vehicle Maker Workhorse Gets a Little Breathing Room," 3 Apr. 2019 Apparently, were SpaceX to seek a greater loan amount, investors would have wanted stronger loan covenants. — Eric Berger, Ars Technica, "What is going on with SpaceX and all these Big Falcon Rocket changes?," 20 Nov. 2018 And anti-Semitism by covenant ensured that Jewish families could only live in certain neighborhoods. — Dan Rodricks, baltimoresun.com, "Rodricks: For Baltimore's vacant homes, why not a buyer's club?," 18 Apr. 2018 Estridge told IndyStar his plans were undone by covenants former owner Ruth Lilly placed upon the land in 1959 to limit development to homes on large lots. — David Lindquist, Indianapolis Star, "Simon estate in Carmel may become Songbook Foundation museum," 4 Jan. 2018

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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Dictionary Entries near covenant

Statistics for covenant

Last Updated

3 Jul 2019

Look-up Popularity

Time Traveler for covenant

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

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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

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.

See the full definition for covenant in the English Language Learners Dictionary

covenant

noun

cov·e·nant | \ ˈkə-və-nənt

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

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