Case study · Bank covenants
A week of covenant math, traded for a year of forward visibility.
Every quarter ended the same way: a week of manual calculation, then a wait to find out whether the bank agreed. Now the calculation is instant and the company can see a covenant problem twelve months before it arrives.
Client
PE-backed technology company
Installed
Covenant reporting and forecasting
Cadence
Recalculated monthly, not quarterly
Forward view
Full year, including covenants
Time to calculate a quarter’s covenants
How far ahead covenants could be seen
The second row is the one that matters. A DSCR problem six months out is a decision; the same problem on the day it breaches is a negotiation.
The shift
What changed
Before
- The last week of every quarter went to covenant math
- Each quarter recalculated from scratch and checked against the last
- Submissions came back from the bank to be redone
- No view of covenants beyond the quarter just closed
After
- Covenants calculated monthly by the same method every time
- Consistent format the bank recognises
- Forecast P&L, balance sheet and cash flow feed forward covenant positions
- A breach risk visible months before it lands
The work
How it was installed
Tailor the calculations to this facility
Covenant reporting is a standard component of the finance system Bluebird installs. The calculations were fitted to this company’s specific covenant definitions.
Move from quarterly scramble to monthly routine
The system now recalculates every month using the same method and the same presentation, so nothing is reconstructed from memory at quarter end.
Push the forecast through to the covenants
The company’s sales forecast drives a full forecast P&L, balance sheet and cash flow — including bank debt — which produces forward covenant positions for the year ahead.
“Six months from now we could have a DSCR problem. What do we do about it today?”
The question the forecast makes it possible to ask
The number
A week, down to an hour or two
Backward-looking covenant calculation went from a full week of work to an hour or two.
Forward visibility went from nothing at all to a full year. That second shift is what turned covenant reporting from a compliance chore into something the management team and the sponsor use to make decisions.
Why this shows up first after a close
Acquisition debt arrives with covenants attached. The company that carried them before the close often has no process for forecasting them, only for reporting them late.
A sponsor who can see a covenant position twelve months out has time to solve it quietly. One who finds out at quarter end is already in a conversation with the lender.
Just closed on a company with immature finance?
Acquisition debt arrives with covenants attached, and most companies can only report them late.