Quick answer: A bond covenant is a promise in a debt contract that regulates what the borrower may do or requires it to meet specified conditions. Covenants can give bondholders information, restrict particular activities or create remedies when the issuer breaches agreed terms. They do not guarantee repayment, and their protection depends on their precise wording and enforcement provisions. A company can continue paying every coupon on time while its financial position is deteriorating. It might borrow more money, pledge valuable assets to another lender or sell a business that generates much of its cash. If you only monitor whether the next coupon arrives, you may learn about those decisions after the risk profile of your bond has already changed. This is why professional credit investors look beyond a bond's interest rate and maturity date. They read the covenants. Yet the word covenant can make a restriction sound stronger than it really is. A promise with broad exception...