Transform risk analytics into Competitive edge for investments and corporate loans

Make your V.I.P. corporate client happy with TAILOR MADE COVENANTS, while watching out for COVENANT BUSTERS : meet ALGOSAVE unique PROBABILITY OF BREACH OF COVENANT.


  • Make V.I.P. corporate clients happy by giving them greater financial flexibility thru tailor-made financial covenants.
  • While, at the same time (since breaching a covenant means an IFRS9-related immediate hit to Net Income) watch out for potential covenant busters.

1 – Make V.I.P. corporate clients happy by giving them greater financial flexibility thru tailor-made financial covenants.

For instance, what if you could Increase your VIP corporate client financial flexibility – and even profitability – by granting them a 3.6 NetDebt-to-Ebitda covenant instead of an “automatic” 3.5 times ?

  • First good piece of news : by doing this you help your VIP corporate client increase its financial flexibility and debt capacity.
    This means a lot to its CEO  : more M&A, more Capex, more working capital…
  • Second good piece of news : you can also announce your VIP client that this means an $ XYZ additional  Return On Invested Capital – ROIC.
    This also means a lot and to a lot of people, starting – of course – with your VIP client’s shareholders.
  • Third REAL good piece of news : you have probably won the origination / underwriting contest, by making a REAL difference…
    And, this means a lot to YOU.

What does it mean from the bank’s perspective, for instance on a 2-year Revolver Credit Facility ?

Meet ALGOSAVE unique Probability of Breach of Covenant.

For instance, and in ALGOSAVE benign macro economic scenario, ALGOSAVE PROBABILITY OF BREACH OF COVENANT shows that, giving this additional leeway to BP PLC means that the Bank keeps 87% of the quality of its early warning bankruptcy protection.

Indeed, the probability of breaching the x3.5 NetDebt to EBITDA covenant stands at 8.09% and drops to 7.01% (a 13% drop) at x3.6. The Bank will “miss” 13% of the total covenant breaching events when granting a x3.6 instead of a x3.5 turn of leverage covenant.

In ALGOSAVE stressed macro economic scenario,  the Bank keeps 93% of the quality of its early warning bankruptcy protection.

This marked difference in probability of breach of covenant is not found in the case of Exxon. In both case, the quality of the bank bankruptcy hedge is kept at 96%.

Hence although granting a 3.6 leverage covenant – instead of a 3.5 leverage – to BP PLC. might be questionable, it is a “no brainer” in the case of Exxon Mobil.

2. Beside gaining a competitive edge, knowing the probability of breaching covenant becomes critical to the P&L of IFRS-reporting Financial Institutions.


  • Indeed, under IFRS9 rules, a breach of covenant triggers an immediate move from 12-month ECL – Stage1 – to lifetime ECL – Stage2.
  • This means a significant increase in Expected Credit Loss with its immediate hit to P&L.
  • As illustrated in the here-above table, behind the “one-size-fit-all” x3.5 NetDebt-to-EBITDA covenant, hides a broad range of probability of breaching this covenant within the next 2 years : from Statoil 3.18% to BP. PLC 36.42% goinf thru Royal Dutch Shell 13.51%.
  • Below the quiet and reassuring surface of  traditional “one-size-fit-all” covenants, hides a boiling reality : degrees of operating and financial leverage, free cash flow volatility, sensitivity to macro economic scenario – and many other parameters – explain this diversity.
  • Endowed with ALGOSAVE probability of Breach of Covenant, credit and risk management committees build a watch list of possible covenant busters. This simple – yet powerful – tool guides them to take action before a sudden breach of covenant immediately hits P&L. They have seen it coming.

Ask for your private access to ALGOSAVE CORPORATE UNDERWRITING PLATFORM, and see how you can SECURE UNIQUE COMPETITIVE edge with your VIP clients while BEING ON THE WATCH for possible COVENANT BUSTERS.