2.2.1 Covenants

This topic provides information on Maintaining Covenant Details for Collateral Category.

Note:

The fields, which are marked with an asterisk, are mandatory.

1. On Collateral Categories screen, click the Covenants tab.
   The Covenants screen is displayed.

   Figure 2-3 Covenants

   
   

   
   Description of "Figure 2-3 Covenants"

   
   
2. On Covenants screen, specify the fields.

   The Revision Date for the covenant is generated based on the Frequency and Due date.

   For example, if the collateral category covenant for a particular covenant name the frequency is monthly and the due date is 15. Based on the date of creation of the collateral covenant category (say 20 JAN 2008) the revision date is 15-Feb-2008.

   For more information on fields, refer to the field description table.

   Table 2-7 Covenants - Field Description

   Field	Description
   Covenant Name	Click the icon and select the name from the list. The list displays the covenant names maintained in Covenant Maintenance screen. Based on the covenant selected, all other details of the covenant maintenance are displayed.
   Description	Displays the description based on the selected covenant name.
   Mandatory	Switch to to include the covenant as mandatory. Switch to to exclude the covenant as non - mandatory. This field gets defaulted from the Covenant Maintenance based on the selected Covenant Name.
   Covenant Reference Number	Specify the reference number for the covenant.
   Frequency	Select the frequency with which the collateral has to be revaluated. The available options are: Daily Weekly Fortnightly Monthly Quarterly Half Yearly Yearly Custom
   Custom Days	Specify the custom days for the covenant. This field becomes available when Frequency is selected as Custom. For example, if the Frequency is defined as Custom and Custom Days is specified as 20, then frequency will be once in 20 days. Note: Custom days value can be minimum 1 to maximum 999.
   Notice Days	Specify the number of days prior to revision date of the covenant. Notice days are mandatory when frequency is weekly and above. Covenant is available for tracking in its notice days. Note: Notice days must be less than the Custom Days in case Custom Days is selected as Frequency. In case the Custom Days value is 1, the system does not allow to capture Notice days. Notice days can be a maximum of 30 days even if the Custom Days is more than 30 days. If Fortnightly is selected as Frequency, the notice days must be less than 14 days.
   Grace Days	This field gets defaulted from the Covenant Maintenance based on the selected Covenant Name. This can later be linked to Collaterals Maintenance screen (GCDCOLLT) for choosing the collateral category while maintaining the collateral. Note: Grace days must be less than the Custom Days in case Custom Days is selected as Frequency. In case the Custom Days value is 1, the system does not allow to capture Grace days. Grace Days can be a maximum of 30 days even if the Custom Days is more than 30 days. If Fortnightly is selected as Frequency, the grace days must be less than 14 days.
   Classification Type	This field gets defaulted from the Covenant Maintenance based on the selected Covenant Name. User can modify the same. The available options are: Internal External
   Linkage Type	This field gets defaulted as Facility, Collateral, or Customer based on the covenant selected.
   Covenant Sub Type	This field is applicable only for non-financial covenant types and is defaulted from Covenant Maintenance (GEDCOVNT) screen based on the selected Covenant. User cannot modify this.
   Covenant Type	his field gets defaulted from the Covenant Maintenance based on the selected Covenant Name. User cannot modify this.
   Formula	Specify the formula for arriving at covenant condition.
   Covenant Target Condition	Select the target condition for the covenant from the drop-down list. The options available are: Greater than or equal to Between Less than Greater than Equal to Less than or equal to Less than
   Target Type	Select the type from the drop-down list. The options available are: Value Percentage Ratio .
   Target from value	Specify the lower limit of value/percentage/ratio for the covenant compliance tracking.
   Target to value	Specify the upper limit of value/percentage/ratio for the covenant compliance tracking.
   Currency	Click the icon and select the currency for covenants from the list. This is mandatory only if Target type is selected as Value.
   Remarks	Specify the remarks about the covenant details for collateral category maintenance.
   Monitoring Information Id	This field gets defaulted based on monitoring information maintenance of the selected covenant.
   Monitoring Information Description	Monitoring Information Description is defaulted based on monitoring information maintenance of the selected covenant. Note: If Between is selected as the Covenant Target Condition, the system derives the covenant compliance status as met only if covenant (value/percentage/ratio) is between specified Target from value and Target to value. Example: Covenant = Debt to Equity ratio Monitoring information = Balance sheet Formula = Total Liabilities / Total Equity Covenant Target condition = BETWEEN Target type = Ratio Target From Value = 1 Target To Value = 2 Currency – (LEFT BLANK) For the above case, the system expects the debt to equity ratio to be between 1 and 2. If Greater than is selected as Covenant Target Condition, the system derives the covenant compliance status as met only if covenant (value/percentage/ratio) is greater than the specified Target from value. Example: Covenant = Free Cash Flow Monitoring information for the covenant = Cash Flow Final Formula = Operating Cash Flow – Capital Expenditures Covenant Target condition = GREATER THAN Target type = VALUE Target From Value = 200000 Target To Value = (LEFT BLANK) Currency - USD For the above case, system expects cash flow to be greater than USD 200000. For more information about Covenant Maintenance, refer to Enterprise Limits and Collaterals Common User Manual.

3. Click Save to save the record.