Covenant Tracking Overview

Purpose

Covenant Tracking gives lenders a single place to define, test, and monitor loan covenants inside a deal — and to watch covenant health across an entire portfolio without opening deals one at a time.

Users define the financial or operational metric a covenant tracks, set the values at which it becomes at risk or breached, schedule how often it is tested, record each test result, and document the remedies that apply if the covenant breaches. Every test is kept in a history with its value, date, and status, so compliance can be evidenced after the fact rather than reconstructed from spreadsheets and email threads.

The same data rolls up into a portfolio-wide compliance signal in the Action Center and into a summary widget on each Deal Overview page.

Key Features

1. Covenant creation with standard and custom metrics: Create covenants against standard credit and operational metrics, or against custom percentage, currency, ratio, and boolean metrics for terms that are not calculated.

2. Breach and at-risk thresholds: Each covenant carries a breach threshold and an at-risk threshold, so a covenant trending toward breach is visible before it actually breaches.

3. Test recording and test history: Record a test with its date, measured value, and an optional note. Status is derived automatically by comparing the value against the thresholds, and every test is retained in the covenant's history.

4. Test cadence and skipping: Set a recurring test schedule so the next test date advances automatically after each test, and skip a scheduled test with a reason when the data is not yet available.

5. Remedies: Document the actions required when a covenant breaches, so all stakeholders can see the agreed-upon response alongside the covenant.

6. Test reminder tasks: Optionally generate a recurring task that follows a covenant's test schedule and completes when a test is recorded, so covenant testing appears in the Action Center alongside other work.

7. Covenants grid, Schedule view, and saved views: Review all covenants on a deal in a sortable, filterable grid with headroom and trend indicators, switch to a timeline of upcoming tests, and save view configurations for reuse.

8. Covenant creation from a loan agreement: Extract covenants directly from a loan agreement document, review the proposed covenants with per-field confidence scores and source page references, and save them to a deal.

9. Portfolio and deal-level monitoring: See portfolio-wide covenant compliance in the Action Center Signals panel and deal-level compliance on the Deal Overview page.

Target Users

Covenant Tracking is for users with the Covenants permission under Deal Management. In practice, that typically means:

• Asset managers, who record tests, act on breaches, and manage remedies across the loans they cover.

• Portfolio managers and executives, who need portfolio health at a glance and an auditable record of breaches and remedies.

• Underwriters, who confirm that the covenant tests configured in Built reflect the approved credit terms.

• Originators, who need visibility into how covenant structures will be tracked after close.

How It Works

Prerequisites

• You must have Full Access to the Covenants permission under Deal Management. If you cannot see the Covenants page, contact your administrator to update your role permissions.

• At least one deal must exist in the portfolio before you can add covenants to it.

Navigating to Covenants

1. Select Portfolio from the top navigation.

2. Click the Deal ID or View for the relevant deal.

3. In the left navigation menu, click Covenants.

Creating a Covenant

1. On the Covenants page, click + New covenant.

2. A side panel opens. Complete the following fields:

   • Name (required) — A descriptive label for the covenant (for example, "DSCR – Quarterly Test").

   • Metric — Select the metric type:

     • Standard metrics: LTV, DSCR, Debt Yield, LTC, Min Net Worth, Min Liquidity

     • Custom metrics: Custom (Percentage), Custom (Currency), Custom (Ratio), Custom (Boolean)

   • Operator — Choose the threshold direction. The operator defaults to the convention for the selected metric and can be overridden if needed.

     • ≥ (must stay at or above) — breach occurs when the value drops below the threshold.

     • ≤ (must stay at or below) — breach occurs when the value exceeds the threshold.

   • Breach threshold value — The value at which the covenant is considered breached.

   • At-risk threshold value — The value at which the covenant enters an at-risk state, between passing and breach. This defaults to a 10% buffer from the breach threshold.

   • Assignee — The user responsible for managing this covenant (optional).

   • Description — Optional notes about how the covenant is calculated or sourced.

   • Watchers — Additional users who should be notified of status changes (optional).

   • Remedies — Define the actions required if the covenant breaches. Click + Add remedy, enter a description of the action (for example, "Cash sweep on operating account" or "Increase reserve deposit by 10%"), and click Add. You can add multiple remedies to a single covenant, and remedies can also be added or edited after creation.

   • Next test — The date of the next planned test (optional).

3. Click Create covenant.

Note:

Tests recorded without a breach threshold are marked Not evaluated until a threshold is added. For Custom (Boolean) metrics there are no numeric thresholds — the covenant uses a Pass condition (for example, Yes / True) and the result is simply pass or fail.

Creating Covenants from a Loan Agreement

Instead of entering covenants one at a time, users can extract them from a loan agreement. The extraction screen proposes a covenant for each obligation it finds in the document, with the source page and a confidence score attached, so each one can be checked against the agreement before it is saved.

1. Open the loan agreement in the Document extraction screen.

2. Review the summary tiles at the top of the page:

   • Covenants — Number of covenants found in the document.

   • Needs review — Number of proposed covenants with low enough confidence that they require attention.

   • Source pages — Number of document pages the covenants were drawn from.

   • Avg. confidence — Average confidence across the extracted covenants.

3. Work through each proposed covenant. Every card shows its own confidence score and a page reference (for example, p. 56) that opens the source page in the document pane on the right. For each covenant, review and adjust:

   • Name (required)

   • Description — The obligation as written in the agreement.

   • Metric (required) — For example, Custom (Boolean) for non-calculated obligations.

   • Pass condition — For example, Yes / True.

   • Schedule — Click Schedule first test to set the initial test date. Covenants arrive unscheduled ("Not scheduled").

   • Assignee and Watchers

   • Remedies — Click + Add remedy to document the breach response.

4. Delete any proposed covenant that should not be created, using the delete icon on its card.

5. Select the deal in the Saving to field, then click Save to deal.

Recording a Test

1. Open the covenant by clicking it in the grid. The side panel opens.

2. In the Test history section, click + Record test.

3. Enter the following:

   • Test date — The business date of the test (for example, the quarter-end date).

   • Measured value — The actual value observed (for example, 1.32 for a DSCR covenant). For boolean covenants, select the pass or fail result.

   • Note (optional) — What was tested, source documents, or anything else notable.

4. Click Save test.

The system derives the status automatically by comparing the measured value against the thresholds, then updates the covenant's latest status and value. If recurrence is configured, the next test date advances to the next occurrence.

Understanding Covenant Status

Each covenant displays a status based on its most recent test result:

• Not evaluated — No test has been recorded yet, or no breach threshold has been set.

• Passing — The latest test value is within the acceptable range.

• At Risk — The latest test value is between the at-risk and breach thresholds. The covenant is trending toward breach.

• Breach — The latest test value has crossed the breach threshold. Remedies may need to be activated.

• Waived — A breach has been waived rather than enforced. Waived covenants count toward the Passing total in portfolio- and deal-level compliance summaries, even though the individual covenant's status badge still reads Waived.

The Breakdown bar at the top of the Covenants page shows a count of covenants in each state. Click a status to filter the grid to that state; click it again to clear the filter.

Setting Up Test Cadence (Recurrence)

Recurrence sets the test schedule for a covenant. The Add recurrence option appears once a next test date is set.

1. Open or create a covenant.

2. Set a Next test date. Once a date is entered, the recurrence row becomes available and shows No recurrence with an Add recurrence button.

3. Click Add recurrence and select an option:

   • Does Not Repeat — One-time test only.

   • Weekly — Select the day or days of the week.

   • Monthly — Select a day of the month (Day 1–31).

   • Quarterly — Select a day of the month (Day 1–31); repeats every 3 months.

   • Semi-Annually — Select a day of the month; repeats every 6 months.

   • Annually — Repeats once per year.

4. Optionally set Ends to On and select an end date, after which no new test dates are generated.

5. Click Done.

Once recurrence is set, the row displays the cadence in plain language (for example, Quarterly, on the 30th) with an Edit button, and the cadence also appears as a subtitle under the covenant name in the grid.

After a test is recorded, the next test date advances by one cadence interval. For example, a Monthly Day 15 recurrence advances to the 15th of the following month.

Note:

If you remove the next test date, the recurrence option disappears and any previously set recurrence is removed.

Skipping a Test

If a scheduled test cannot be completed on time, skip it rather than leaving it overdue.

1. Open the covenant.

2. In the Test history section, click Skip next to the next test date.

3. Select a reason: Data not yet available, Borrower delayed reporting, Cadence changed, or Other.

4. Optionally add a note explaining the skip, then save.

The skipped test is logged in the test history, and the next test date advances to the next occurrence if recurrence is configured.

Waiving a Breach

If a covenant breaches but the lender chooses not to enforce it — for example, due to extenuating circumstances — the breach can be waived.

1. Open the breached covenant.

2. Record the test, or open the existing breached test.

3. Select Waive this breach.

4. Save.

The covenant status changes to Waived. The test value is preserved for audit purposes, but the breach is no longer treated as an active compliance issue.

Managing Remedies

Remedies document the actions required if a covenant breaches (for example, "Cash sweep on operating account"). They serve as a reference so all stakeholders can see the agreed-upon breach response alongside the covenant.

1. Open the covenant by clicking it in the grid.

2. In the Remedies section, click + Add remedy.

3. Enter a description of the required action in the Description field.

4. Click Add.

You can add multiple remedies to a single covenant. Remedies on breached and waived covenants are also surfaced in the grid toolbar, so it is possible to see which covenants have remedies without opening each side panel.

Creating a Test Reminder Task

A covenant can generate its own recurring task so that covenant testing shows up in the Action Center alongside the rest of a user's work.

1. Open the covenant and scroll to the Task reminder section at the bottom of the side panel.

2. Turn on Create test reminder task.

3. Click Save.

This adds a recurring task that follows the covenant's test schedule and completes when a test is recorded.

Viewing a Covenant

Click any covenant in the grid to open the side panel.

Header

• Covenant name with its current status badge.

• Latest vs. threshold — The latest test value shown against the breach threshold.

• Headroom — The distance between the latest value and the breach threshold. Positive values indicate the covenant is within the acceptable range; negative values indicate the threshold has been crossed. Shows "--" when no test has been recorded.

Covenant summary

• Name

• Metric — set at creation and cannot be changed

• Operator

• Breach threshold value

• At-risk threshold value

• A horizontal band showing the passing zone (green), at-risk zone (orange), and breach zone (red), with markers for the current value, the at-risk threshold, and the breach threshold

• Assignee

• Description

Watchers — Users who receive notifications about this covenant.

Remedies — Any remedies added to the covenant, with a button to add another.

Test history

• A summary of how many tests have been recorded and the date of the most recent one.

• Next test — The next scheduled test date, with the time until the test or, if it has passed, how many days it is overdue, plus a Skip button.

• Recurrence — The test cadence, or No recurrence with an Add recurrence button.

• Trend — A sparkline showing test values over time. Green indicates passing; red indicates breached. A dotted line represents the threshold. Shows "--" when there is no test history.

• A table of all recorded tests with Date, Value, and Status, including any note recorded with the test.

Task reminder — The Create test reminder task toggle described above.

Editing a Covenant

1. Click the covenant in the grid to open the side panel.

2. Modify any field: Name, Description, Operator, Breach threshold value, At-risk threshold value, Next test, Recurrence, Assignee, Watchers, or Remedies.

3. Click Save.

Note:

• The metric cannot be changed after creation. If a different metric is needed, create a new covenant and delete the old one.

• Important: Changing the operator or a threshold value causes the system to recalculate the status and trend for all previously recorded tests. A covenant that was breached under the old thresholds may show as passing under the new values, and the trend colors update accordingly. Review the existing test history before making these changes.

Deleting a Covenant

1. Open the covenant in the side panel.

2. Click Delete.

3. Confirm the deletion.

Deleted covenants are removed from the grid and no longer count toward status totals. This action cannot be undone.

The Covenants Grid

Compliance and Breakdown

• Compliance — The overall passing percentage for the deal, with the change compared to the previous period (for example, "0pp vs Prev").

• Breakdown — A segmented bar with a count and share for each state: Passing, At risk, Breach, and Not evaluated. The number of active covenants is shown at the right of the bar. Click a status to filter the grid to that state; click again to clear.

Grid columns

• Name — Covenant name, with its test cadence shown as a subtitle.

• Metric

• Latest Value — The most recent measured test value.

• Threshold — The breach threshold, shown with its operator.

• Headroom — The distance to the breach threshold, with a gauge.

• Trend — A sparkline of values over recent tests.

• Status

• Next Test — The next scheduled test date. Overdue dates appear in red with a lateness badge (for example, 10D LATE).

• Assignee

Click any row to open the covenant side panel for viewing, editing, or recording a test. Click any column header to sort by that column; click again to reverse the sort order.

Search, saved views, and filters

• Search covenants — Find a covenant by name.

• Saved views — Save and reapply a grid configuration from the Select… control.

• Status — Filter by covenant status.

• Metric — Filter by metric type.

• Assignee — Filter by assigned user.

• Active only — Limit the grid to active covenants.

Grid toolbar

• Remedies — Displays a count of remedies associated with breached and waived covenants. Click to view the list.

• Columns — Select which columns are visible in the grid.

• Export — Export the covenants data to Excel or CSV.

• Grid — Selected by default. Returns to the grid from the Schedule view.

• Schedule — Switches to the Schedule view.

Schedule View

Click Schedule to switch from the grid to a timeline of covenant tests.

• Covenants are listed on the left with their cadence as a subtitle; months run across the top.

• Each covenant shows markers for its tests, color-coded by the legend: Completed, Next, Projected, and Overdue.

• A vertical line marks today's date, and upcoming test dates are labeled.

• Use the 6M, 1Y, and All controls to change the time range.

• Click Grid to return to the default grid view.

Monitoring Covenants from the Action Center

The Action Center provides a cross-deal view of covenant health, so there is no need to open individual deals to see which covenants need attention.

1. Click Action Center in the top navigation.

2. Find the Covenants section in the Signals panel on the right side of the page.

Compliance summary

The section header shows the portfolio-wide Compliance percentage passing, above a segmented bar with a count and share for each state:

• Passing

• At risk

• Breach

• No tests

Covenant list

Click Show more to expand the section into a list of covenant cards. Each card shows:

• Covenant name

• The deal it belongs to

• The latest measured value against its threshold

• The date the covenant was last tested

• A trend sparkline

Use Sort to change the ordering (for example, by status), Show N more to page through the list, and Collapse to return to the summary view. A Milestones section sits below Covenants in the same panel.

Covenants on the Deal Overview Page

Each Deal Overview page includes a Covenants widget in the right-hand column showing the deal's compliance percentage passing and counts for Passing, At risk, and Breach. Click Show more to expand it.

Permissions

Covenant access is controlled by the Covenants permission under Deal Management:

• No Access — You cannot view or access the Covenants page.

• Read Access — You can view covenants but cannot add, edit, or delete them.

• Full Access — You can view, add, edit, and delete covenants.

Contact your administrator to update your permission level.

Benefits

• Compliance in one place. Covenants, thresholds, test results, and remedies live on the deal instead of in spreadsheets and email threads.

• Early warning, not just breach reporting. At-risk thresholds, headroom, and trend sparklines surface covenants heading toward a breach while there is still time to act.

• An auditable compliance record. Every test keeps its date, value, status, and note, and skipped tests are logged rather than silently dropped.

• Portfolio oversight without deal-by-deal navigation. The Action Center Signals panel shows compliance across every deal a user has access to.

• Faster covenant setup. Extracting covenants from a loan agreement removes most of the manual entry needed to stand up a new deal, with source pages available for verification.

• Covenant work in the same queue as everything else. Test reminder tasks put covenant testing into the Action Center alongside document collection and reviews.

• Clear accountability. Assignees and watchers make it explicit who owns a covenant and who needs to know when its status changes.

Best Practices

• Set an at-risk threshold on every covenant. The default 10% buffer from the breach threshold is a reasonable starting point, but tune it to how much warning is actually useful for the metric.

• Add a breach threshold before recording tests. Tests recorded without one are marked Not evaluated rather than passing or breached.

• Choose the metric carefully at creation — it cannot be changed afterward. Changing it means creating a new covenant and deleting the old one.

• Review the test history before changing an operator or threshold. Those changes recalculate status and trend for every previously recorded test, which can flip historical results from breached to passing.

• Skip a test rather than leaving it overdue when data is not yet available. The skip is logged with a reason and the schedule advances cleanly.

• Use the note field when recording a test to capture what was tested and which source documents were used. It is the cheapest form of audit trail available.

• Document remedies at creation, not after a breach. The point of a remedy is that everyone can see the agreed response before it is needed.

• Turn on Create test reminder task for covenants with a regular cadence, so tests appear in the Action Center rather than depending on someone remembering.

• When extracting covenants from a loan agreement, work the Needs review items first and use the page references to check each covenant against the source language before saving.