What are "Maintenance Covenants" primarily concerned with?

Maintenance covenants are primarily concerned with the borrower maintaining specific financial ratios over the life of the loan. These covenants are designed to ensure that the borrower remains financially healthy and is able to meet its debt obligations. By requiring the borrower to maintain certain financial metrics, such as a minimum level of interest coverage, a maximum leverage ratio, or a minimum liquidity level, lenders can monitor the creditworthiness of the borrower on an ongoing basis. This provides protection to lenders by ensuring that potential risks to repayment are addressed early through compliance with these financial benchmarks.

Other options, while related to the overall context of lending and financial agreements, do not capture the primary focus of maintenance covenants. For example, interest rate changes relate to market conditions rather than the borrower's financial health. Restrictions on asset sales pertain more to negative covenants, which limit certain activities, rather than performance metrics. Conditions under which the loan can be called relate to event-driven covenants that activate under specific circumstances, which is different from the ongoing performance monitoring aspect of maintenance covenants.