A borrower breaches a maintenance covenant — what does the lender do, and how does it affect returns?

How to answer

First quantify the breach and the borrower's liquidity runway, then work the options ladder: a waiver or covenant reset, an amend-and-extend, a sponsor equity cure, or — if it's deeper — a restructuring. Crucially you price the concession: a fee bump, a spread step-up, more amortization or tighter terms, which actually increases the lender's go-forward yield in exchange for the flexibility granted. The maintenance covenant is what gives the lender that early seat at the table versus cov-lite, where there's no test to trip until a payment default.

Key idea: Quantify, ladder the options, and price the concession (fee/spread bump).