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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Covenant waiver

What is a covenant waiver, and what does it cost?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

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A covenant waiver is the lender's written agreement not to treat a particular breach as a default, usually for one test date and on conditions. Waivers commonly come with a fee, a margin increase, more frequent reporting or a reset covenant, and a lender reads a request made before the test date very differently from a breach it discovers afterwards. A waiver repeated at every test is a sign that the covenant was set in the wrong place, or that the business has changed.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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