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Covenant breaches are appearing with greater frequency across today's credit markets, and lenders are feeling the pressure to respond quickly and strategically. In our recent ABF Journal article, "Don't Panic: Five Smart Plays for Lenders When a Borrower Breaches a Covenant," we outline a practical framework for navigating these moments — from the first signs of a default through the decisions that shape amendments, remedies, and long-term credit risk.
The key themes are straightforward:
- Understand the breach within the confines of your documents
- Communicate with precision
- Document everything
- Use the full range of contractual tools to recalibrate risk
But the real value lies in how these steps interact in practice, especially in an environment where defaults can escalate quickly and borrower conditions can shift month to month.
Our full analysis unpacks these considerations with examples and tools lenders can use to protect their rights while maintaining leverage and preserving optionality. For lenders facing, anticipating, or simply preparing for covenant-driven events of default, the article offers a grounded roadmap for responding decisively in a changing market.
Read the full ABF Journal article here.
In recent months, credit providers of all types, including private credit and traditional bank lenders, have increasingly faced borrower defaults based on loan covenant breaches, whether due to financial distress, operational challenges or changing market conditions. Prompt and strategic action is essential to protect lenders' interests, in the event of such breaches, to preserve available remedies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
