[Verse 1] When companies borrow money from the bank They sign a contract with terms that have some rank Not just interest rates and payment dates in line But covenants that keep the business in design These rules protect the lenders from their fears That management might waste away the years With risky moves that put their money at stake So debt contracts have limits they can't break [Chorus] Debt covenants watch what you do Keep the ratios in the right view Current ratio, debt to equity too Cash flow coverage pulling you through Management can't just do what they want When covenant rules are there to haunt Protect the lenders, guide the way Debt covenants every single day [Verse 2] Financial covenants set the numeric bounds Minimum working capital must be found Maximum debt levels that you cannot cross Or technical default becomes your loss Operating covenants control the daily game Can't sell major assets or change the company name No big investments without the lender's nod These restrictions keep management on guard [Chorus] Debt covenants watch what you do Keep the ratios in the right view Current ratio, debt to equity too Cash flow coverage pulling you through Management can't just do what they want When covenant rules are there to haunt Protect the lenders, guide the way Debt covenants every single day [Bridge] When covenants are violated what's the cost Waiver requests or all hope could be lost Higher interest rates might be the price Or acceleration making payment twice But covenants also help the company stay On a fiscally responsible way Discipline in decisions every day Keeping bankruptcy fears at bay [Verse 3] Management behavior changes with these chains Strategic planning must consider all constraints Conservative choices become the norm As covenant compliance keeps them in form Dividend payments might be restricted tight Capital expenditures need approval sight The lenders' interests shape the company's course Debt covenants become a guiding force [Chorus] Debt covenants watch what you do Keep the ratios in the right view Current ratio, debt to equity too Cash flow coverage pulling you through Management can't just do what they want When covenant rules are there to haunt Protect the lenders, guide the way Debt covenants every single day [Outro] So remember when you analyze a firm Look for covenants and how they confirm The balance between lender and borrower's needs Debt covenants plant responsible seeds
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