Covenant (Pensions) definition

View the related practice notes about Covenant (Pensions)

Actuarial funding valuations

STOP PRESS: On 4 December 2024 the Pensions Regulator (TPR) finally published the updated employer covenant guidance for trustees of DB pension schemes, aligned with its new DB funding code of practice which was brought into effect on 12 November 2024 by the Pensions Act 2004 (Code of Practice) (Defined Benefit Funding) Appointed Day Order 2024, SI 2024/1143. Described by TPR as ‘the last piece of the jigsaw to help schemes carry out valuations under the new DB funding code’, the updated guidance includes the first regulatory definition of employer covenant aiming to provide greater market certainty and promote consistency across schemes. Key updates encompass cash flow analysis, reasonable affordability assessments, maximum affordable contributions, reliability periods, covenant longevity, and contingent assets. The updated guidance emphasises proportionality in covenant assessments and includes worked examples for complex areas. Significantly, TPR expects trustees to use the updated guidance to review whether their existing covenant analysis is focused in the right areas and remains proportionate, especially where trustees have experienced significant changes in their...

Acquisition finance—representations, covenants and events of default

This Practice Note discusses:•the purpose of and typical representations in a leveraged senior facilities agreement (SFA) and how these differ from those in an investment grade facility agreement•common ways for the sponsor to attempt to limit the scope of the representations•when representations are typically given •purpose of and typical information undertakings in a leveraged SFA•purpose of and typical general undertakings in a leveraged SFA•the use of 'baskets' to limit the impact of the general undertakings•purpose of and typical events of defaultThe information in this Practice Note assumes an SFA in a similar form to the senior multicurrency term and revolving facilities agreement for use on leveraged acquisition finance transactions available to members on the LMA website (LMA Leveraged SFA). For information on other aspects of a leveraged finance facilities agreement, see Practice Note: Introductory guide to leveraged finance facilities agreementsFor more information on the terms used in this Practice Note, see: Glossary of acquisition finance terms and jargon.This Practice Note provides introductory information only. Each section links through to any...