17. Amendments, Waivers, and Consents

What’s in this chapter:

• What causes a company to pursue changes to its covenants

• Differences between amendments, waivers, and consents

• How tenders and exchange offers are used to achieve covenant changes

The preceding chapter covered some of the complexity of understanding covenants. This chapter addresses how covenants can get changed.

Sometimes a company either wants to do something that would violate the existing negative covenants or is worried about violating affirmative covenants. When this happens, the company has a few options to address the problem. One is to retire the existing debt and, if necessary, replace it with new debt that permits it to undertake the actions it wants to perform. This can sometimes be expensive and difficult. The new financing requires a new round of legal, accounting, and financing fees and exposes the company to market risk in the coupon for the new financing. The second method is to approach the debt holders and negotiate an amendment or a waiver to the terms that the company needs to change. This usually involves paying the debt holde....