Portfolio, Investment & Restructuring
Waivers and Covenant Resets
Summary
A waiver permits a defined departure from an existing loan obligation, while a covenant reset amends the contractual test itself.
Why this matters in ship finance
Both can preserve a viable borrower but may also defer recognition of deeper repayment problems.
The concept
Waiver scope, duration, consent thresholds, fees, security and reporting obligations follow the finance documents. Regulatory forbearance classification for banks is a separate question.
How it is used in practice
Model revised headroom and repayment under the proposed terms, identify approval levels and record whether the change addresses liquidity or merely delays default.
Practical issues
A waiver is not an automatic cure of all events of default. Check cross-default provisions, lender accounting and prudential forbearance treatment.
How ShipFinance.ai uses this concept
Prepare before-and-after covenant trajectories and decision summaries.
Key takeaways
- Waivers and permanent resets have different legal effects.
- Borrower relief may create lender forbearance obligations.
- Stress the post-amendment debt profile.