Covenants for LPs

Why it Matters

Private credit documentation is increasingly complex, and the covenant protections that determine LP outcomes are often buried in definitions, baskets, and cross-references that obscure real flexibility. Traditional credit education focuses on spreads, ratings, and headline metrics; this course teaches the document literacy and critical skepticism needed to see past a manager's pitch and into the terms themselves. By learning to identify weakening protections, hidden flexibility, and the patterns that separate disciplined managers from trend-followers, you gain a competitive edge in manager selection, re-up decisions, ongoing monitoring, and fiduciary oversight of private credit allocations.

Course Overview

Covenants for LPs is a self-paced online course built for institutional investors allocating to private credit and leveraged finance strategies. Through a combination of case studies anchored in the Monkey Business annotated offering memorandum, step-by-step analytical frameworks, and dedicated manager diligence prompts, you'll gain the skills to interpret loan documentation, assess covenant discipline, and engage with GPs on substance. The course is structured around the core areas of covenant risk:

Foundations and Capital Structure

Build the base every other module sits on:

• The Leveraged Finance Market – Understand the landscape LPs are investing into and the goals of each party in the deal.
• Maintenance vs. Incurrence Covenants – Learn the difference between covenants that discipline borrower behavior and covenants that only react to it.
• Capital Structure and Credit Support – Analyze the cap stack, the structure chart, and why subordination and credit support determine recovery outcomes.

Debt, Liens, and the Protections That Matter

Learn to assess the covenants that govern how much additional debt and how many additional liens a borrower can layer on:

• Debt Covenant Mechanics – Understand how the covenant works and the key risks embedded in baskets and ratio capacity.
• Non-Guarantor Debt Incurrence – Spot the structural subordination risk that sits quietly inside most covenant packages.
• Secured Debt Capacity – Apply a step-by-step framework to calculate what a borrower can actually do under the liens covenant.

Restricted Payments, Asset Sales, and Ownership Changes

Master the covenants that determine whether value can leave the credit group:

• Restricted Payments and "The Box" – Understand how borrowers build capacity to pay dividends, fund investments, and move assets.
• Asset Sales Mechanics – Assess how proceeds must be applied and where the carveouts create real flexibility.
• Change of Control and Portability – Recognize when a change of ownership triggers repayment and when it doesn't.

ESG, Reports, Defaults, and Amendments

Cover the terms that govern the lender-borrower relationship over the life of the deal:

• Sustainability-Linked Instruments – Understand ESG margin ratchets and sustainability-linked bond structures.
• Reports and Defaults – Learn what lenders are entitled to see and what triggers a default.
• Amendments and Waivers – Assess how terms can change after the deal closes and what that means for LP exposure.

Each module combines covenant concepts with a dedicated set of questions for LPs to ask private credit managers, giving you the tools to apply your learning immediately during manager selection, re-up decisions, and ongoing monitoring.

What You’ll Take Away

By the end of this course, you will be able to:

• Read and interpret the key protections in a high yield bond or leveraged loan document.
• Assess capital structure, credit support, and subordination to understand how a position sits in the waterfall.
• Analyze debt, liens, restricted payments, and asset sales capacity to identify hidden flexibility.
• Evaluate change of control, portability, and economic terms for their impact on LP outcomes.
• Ask specific, informed questions of private credit managers during selection, re-up, and monitoring.
• Apply a repeatable framework for covenant oversight across managers, strategies, and market cycles.

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Who the Course is For

This course is designed for institutional investors who want to develop a sharper eye for covenant risk in private credit and leveraged finance allocations. Whether you are a pension fund investment professional, sovereign wealth fund allocator, endowment or foundation investor, family office principal, insurance allocator, or consultant running manager selection, you will gain the tools to interpret loan documentation, evaluate manager discipline, and make more informed allocation decisions. No prior legal background is required, just curiosity and a willingness to engage with the terms that shape your returns.

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