The covenant package in the marketing materials is not the covenant package in the credit agreement. This workflow extracts, reconciles, and tracks the terms that actually govern the deal.
EBITDA in the deck is not EBITDA in the credit agreement. Addbacks get layered in across the definitions section, the financial covenant, and the permitted basket provisions. By the time you read the agreement in full, the number you are testing against may bear little resemblance to what the sponsor presented.
Restricted payments, permitted investments, and incremental debt baskets are negotiated term by term. Ratios nest inside builder baskets. Carve-outs have their own conditions. Reading the basket structure correctly requires tracking cross-references through thirty pages of definitions.
A covenant that tests quarterly at 6.0x is a different risk profile than one that only triggers on new borrowings. That distinction does not always survive the deal process clearly. By diligence close, the team needs the tested covenant structure — not a summary of what the sponsor said it would be.
Credit agreement, amendment, consent, and any side letter. The workflow reads the executed documents — not the term sheet, not the lender presentation.
Maintenance covenants, incurrence covenants, restricted payment conditions, incremental debt provisions, and default triggers identified and sourced to the specific section and page.
Every defined term used in the covenants traced back to its full definition. EBITDA addbacks enumerated. Basket caps and builder formulas documented. Cross-references resolved so the covenant reads as a complete unit.
Where the agreement diverges from the term sheet, the marketing materials, or the sponsor's diligence presentation — surfaced explicitly, with source citations on both sides.
The defined EBITDA in the agreement permitted addbacks that the lender presentation had not made explicit. The practical effect was a tested leverage ratio materially different from the one the sponsor had presented.
This is not an unusual situation. EBITDA definitions in leveraged credit are negotiated addback by addback, and the final language often diverges from what was discussed at term sheet. The gap only becomes visible when someone reads the definitions section in full and traces every cross-reference. That is what this workflow does.
This workflow can be calibrated to your credit agreement structure, deal type, and covenant testing framework. The setup takes a conversation.
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