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.- On Collateral Categories screen, click the
Covenants tab.The Covenants screen is displayed.
- 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)
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:For more information about Covenant Maintenance, refer to Enterprise Limits and Collaterals Common User Manual.- 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
- Click Save to save the record.
Parent topic: Collateral Categories