Many treasuries lack the time and the tools to develop an effective compliance process for their non-financial covenants. For these treasuries, an easy-to-implement, cost-effective way to manage their non-financial covenant risks is with our new web-based DCS General Questionnaire℠.
Based on our experience of analyzing thousands of debt agreements, we have identified the 35 non-financial covenants included in most debt agreements. Each covenant has a questionnaire module of 2-5 broadly-written questions on the covenant’s typical requirements. We do not include any pre-conditions, exceptions and other legalese for the SME respondents to struggle to figure out. Instead, we simply ask whether the requirement happened or not.
For example, many companies have an Asset Sale covenant, often qualified by “if material” or “if exceeding $x million”, etc. We simply ask “Was there an Asset Sale?” and if “Yes”, our web questionnaire process – DCS Covenant Manager℠ – requires the SME to provide the facts of the sale.
It is then the Compliance Team’s job to evaluate the facts against their interpreta- tion of the covenant to determine how the facts should be managed. By cutting out the legalese, our questions are easy for your SMEs to accurately answer — and trains them on the actions and events that have covenant implications.