> could trip a covenant and get in trouble with lenders Lenders usually don't exercise their covenants willy-nilly because doing so is a good way to end up wit

> could trip a covenant and get in trouble with lenders Lenders usually don't exercise their covenants willy-nilly because doing so is a good way to end up with less money than you started with. Most covenants are written broadly, in a way to let lenders recapture some of their principal in the event the corporation is indeed on the way to bankruptcy. Specific example: company is floundering, throwing their remaining cash into a losing business. Lenders might prefer to trigger covenants, take them to bankruptcy, and liquidate and receive 60 cents on the dollar, rather than wait and receive less later on. But if the lenders think the business is doing fine and they will eventually get repaid, the covenants are more of a negotiating position rather than a real threat. Of course all this changes if the debt changes hands and, say, a hostile entity gets a controlling share -- but that's what finance departments are supposed to look out for.