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Documentation Index

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Covenants are borrower-specific financial and operational rules that govern how a facility can be used after it is approved and funded. They define the limits, reporting obligations, and escalation triggers Nexio uses to monitor borrower performance throughout the life of the loan.

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Covenant Types

Each borrower is bound by a covenant package tailored to its facility terms, credit profile, strategy, and operating model. Nexio’s Risk and Governance Committee reviews the covenant framework as part of facility approval. There are two types of covenants: 1) Financial Covenants:
  • Liquidity requirements: Borrowers may be required to maintain minimum cash, collateral, or unencumbered asset buffers relative to outstanding BTC borrowings, although this is not necessarily enforced.
  • Leverage limits: Facility terms can cap overall leverage or risk concentration across venues, strategies, or counterparties.
  • Utilization and draw limits: Borrowers can be restricted in how much of an approved facility may be drawn or rolled at any point in time.
  • Performance triggers: Material deterioration in financial condition, losses, or capital position can trigger additional review or remedial action.
2) Operational Covenants:
  • Reporting cadence: Borrowers must provide periodic balance, position, and operating updates at the frequency defined in the facility documents.
  • Venue and counterparty restrictions: Borrowers may be limited to approved exchanges, custodians, brokers, or trading counterparties.
  • Notice obligations: Borrowers must promptly disclose material events such as regulatory issues, liquidity stress, operational incidents, or covenant pressure.

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How Covenant Enforcement Works

Nexio monitors covenant compliance through borrower reporting, internal review, and facility servicing controls.
  1. Data collection: Nexio receives borrower reports, position data, payment updates, and any required supporting information under the facility’s reporting schedule.
  2. Threshold testing: The servicing and risk functions compare that information against the borrower’s approved covenant package and facility terms.
  3. Escalation: If a covenant is breached or trending toward breach, Nexio can issue a notice, require additional reporting, or pause further draws while the issue is reviewed.
  4. Cure or remediation: During the cure period, the borrower may be required to reduce exposure, improve liquidity, repay part of the facility, or satisfy other corrective measures.
  5. Default response: If the breach is not cured, Nexio can apply the remedies available under the legal agreements, including suspension, acceleration, enforcement, or workout procedures.
All covenant events, borrower notices, payment issues, and remediation steps are recorded through Nexio’s servicing, legal, and reporting workflows so lenders and internal stakeholders can track facility performance over time.