Managing bank debt covenants

What is the objection that the client is making to those who you've presented? I agree, monitoring a covenant should be simple.

The covenant is spelled out in the contract. Management develops a system that monitors and reports. This draft is presented to the Bank for approval and sign-off of the system and reports, and then its just follow-through... Periodic reports to the bank.

What else could they want? Outside audits (probably already part of the covenants)... interim audits, internal audits, a CCO?

There is actually software that automates the monitoring of bank covenants. Whether or not they are complicated depends on who is extending the credit, the credit rating of the company borrowing money (or has a revolving credit line in place), and the negotiating skills of the person at the company accessing credit.

Here is a link to a webinar recording that speaks to the technology out there to help companies more effectively monitor covenant compliance risk.

https://www.proformative.com/resources/learn-how-structure-execute-debt-compliance-program-webinar-video?pc-resources=1523124

James,

I doubt you are missing anything. More than likely this was a perceived weakness or failure of the departed CFO. As a result, the PE owners have pushed the pendulum to the opposite side.

If you have a strong candidate who lacks this direct experience, focus on something that could be equivalent. One example might be management, tracking and reporting of SOx information and certifications, which most senior financial people have performed or administered over the last decade. Further, the strong candidate, lacking this specific requirement, will be prepared to discuss availability, cost, reliability and ease of implementation of one or more software solutions such as Ernie mentions.