Why two NBFCs are requesting easing of bond covenants | Company Business News

Two leading Non-Banking Financial Companies (NBFCs) are seeking regulatory relief by requesting the easing of bond covenants, which are crucial components of debt agreements. These covenants establish specific obligations and restrictions for debt issuers, ensuring they maintain financial discipline. However, the current economic climate has prompted these NBFCs to advocate for more flexible terms, arguing that such adjustments could provide them with the necessary agility to navigate market challenges. The push for easing covenants comes amid concerns that rigid terms could hamper the NBFCs' ability to manage liquidity effectively. In the event of a covenant breach, bondholders are entitled to demand immediate repayment, which could strain the financial stability of these companies. The NBFCs assert that relaxing these conditions would allow them to pursue more strategic investments and operational decisions without the looming threat of triggering defaults. This request reflects broader industry trends where companies are seeking adaptive measures to withstand economic volatility. Regulators and stakeholders are now faced with the challenge of balancing the need for financial prudence with the flexibility required for growth and innovation. As discussions continue, the outcome could set a precedent that influences future debt structuring across the sector, impacting both issuers and investors alike.

— Authored by Next24 Live