when an issuer violates a bond covenant it is considered to be in technical default a common penalty for violating a bond covenant is the downgrading of a bond s rating which could make it less attractive to investors and increase the issuer s borrowing costs for example moody s one of the major credit rating agencies in the united states rates a bond s covenant quality on a scale of 1 to 5 with five being the worst this means that a bond with a covenant rating of five is an indication that covenants are being violated consistently 
lenders will often allow for remedy on violated covenants for financial covenants after a company has breached its covenant it must often in general a party may have legal recourse to seek compensation for damages should a different party have breached a covenant for property failure to comply with association rules or covenants may result in fines or liens though an hoa cannot force a homeowner to sell their home other types of property covenants may call for liquidation or transfer of ownership failure to comply with law covenants results in fines penalties fees or more serious legal punishment when you park your car on the side of the street you are subject to the covenant that stipulates you pay for that space during a specific time should you fail to comply you are subject to a parking ticket any court proceeding or case is an example of a failed covenant lastly different religions uphold different consequences for not adhering to specific teachings the quran states that should someone stray from believing in islamic teachings allah will never forgive them nor will he guide them to the right way example of bond or debt covenantsas part of its 2021 annual report amazon com inc publicly disclosed its note payable obligation because of the potential importance and restriction of covenants it chose to publicly state that the notes were not subject to any covenants 6conversely apple inc also report notes payable though there are terms and conditions as part of their debt obligation the following excerpt from its 2021 annual report outlines exceptions the limitations on additional interest on the notes the company will subject to the exceptions and limitations set forth below pay as additional interest on the notes such additional amounts additional amounts as are necessary in order that the net payment by the company or the paying agent of the company will not be less than the amount provided in the notes to be then due and payable 7apple further discusses covenants restricting consolidation or merger activity their covenant states they may perform these activities as long as 