How do I manage covenant control in the Kls Desk Debt Tracking application?

In this article, you'll find all our tips for managing covenant control on a day-to-day basis.

1. How the covenant control tab works

To begin, go to Debt Tracking > Operation follow-up > click on the desired operation > Covenant control.

The Debt Tracking tab is a dashboard of all current and upcoming controls, as well as a space for those that have already been checked.

Each control is created automatically when the covenant is published, based on the information entered in the covenant list tab.

For each control listed, you will find : 

• The covenant wording
• Status: 
  • Waiting: the covenant test date has passed, the Borrower can respond now.
  • Waiting (with clock): the covenant deadline has passed.
  • Coming: this covenant is not yet expected, and the Borrower may respond at a later date.
  • Result received: the Borrower has responded to the covenant (or the operation manager who has the authority to respond on the customer's behalf).
  • Validated: the operation management team has validated the covenant.
  • Result KO: the value entered is not what is expected. Example: the value of a ratio must be < 3 and the value entered is 3.5, the result will automatically appear KO. You have the option of validating the result or declaring a break.
  • Non conform: you (or a member of your team) have declared the result non conform. The Borrower can respond to the covenant again.
  • Breach noted: you have declared a breach of covenant. A waiver may subsequently be drawn up, even after the breach has been shared with the lenders.
• Expected result: this can be either a document or a value, depending on the covenant nature.
• Result received: if a result has been entered, “document” or “value X” will be displayed.
• Control date: the date appears only if you have controlled the covenant.
• Test date and covenant deadline.
• The result of the waiver vote.

All checks on a transaction are visible to the management team and to Borrower contacts. 
Lenders only see controls whose results have been shared (validation or breakage declaration).

Within this tab, you can use the available filters:

Click on the chosen filter to apply it, then click again to return to the basic view.

2. Reply to a covenant

A covenant check can be answered either by the Borrower or by the operation manager.

To help your customers respond to covenants in Debt Tracking, they can consult: How do I use Kls Desk's Debt Tracking application as a Borrower or Issuer?

When a Borrower responds to a covenant, the operation manager contacts receive an automatic notification containing a link to the covenant in question. You can then check it before sharing it with lenders. See checking a covenant.

If, as the operation manager, you wish to reply in the Borrower's place, go to the desired control and click on “reply in the customer's place”: 

Then load the files and/or the expected value and validate. The control will then change status to “result received” or “result KO” in the case of a value that is not in line with expectations.

You can also enter a note for my team (visible only to the operation management team) and a comment for the pool and the customer.

This entry will remain traced within the control and can be modified at any time.

3. Checking a covenant

To check a covenant, a response must have been registered. The status is either “result received” or “result KO”.

You can download the documents that have been uploaded.

The following actions are possible:

• Validate result
• Declare a breach.
• Click on the “more actions” button to :
  • Modify input: you can add and/or delete documents. 
  • Declare the result non-compliant: the Borrower will again be able to respond to the covenant. The Borrower will receive an e-mail notification containing a link to the covenant.
  • Deactivate the control: this control will not be checked (in the case of a covenant holiday, for example).
  • Delete the response received on the control: the check will revert to “waiting” status and the information entered (value, documents, customer comment) will be deleted.
• To share the result with lenders, the covenant must be validated or with a breach noted status: 

Click on the “share with lenders” button, or “archive control” in the case of a bilateral transaction. The check will automatically change to “archived” status, and will be visible in the archived checks area of the file's covenant control tab. The information contained is traced in each control.

In the case of a breach declaration, you can trace a waiver decision: 

4. Covenant control notifications

Covenant control events (reminders or user actions) generate automatic notifications. You can see what notifications are sent to my stakeholders.

You can set automatic notifications at any time. See the page on how to set up automatic notifications.

You can also send instant personalized notifications to your customers and/or lenders. See the page on personalized notifications.