The Covenant-Risk Walk
Identify balance-sheet changes that pressure debt covenants before default.
The moment A portfolio company is still paying interest, but its revolver tests minimum liquidity next quarter. Inventory build and current debt could trip the wire first. The first interpretation can send the whole read in the wrong direction. The Covenant-Risk Walk Use a three-stop walk: classify the line, connect it to cash or claims, then conclude with the evidence that would change your view. Shortcut one ratio, one verdict a defensible read Covenant risk is where accounting numbers become contractual tripwires. Stop 1 Classify The headline number moved, but the mix behind it also changed. What is the strongest…
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