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Undertakings, or covenants as they are sometimes called, are promises given by the Borrower(s) and any obligors to the Lender (or Finance parties in a syndicated facility) to perform or not perform certain actions. The borrower may also undertake to procure that its subsidiaries adhere to the undertakings. In contrast to representations, undertakings will remain in force throughout the life of the facility.

The breach of an undertaking will normally trigger an event of default. Rather than exercising its contractual right following an event of default to accelerate the loan, ie demand repayment of the loan, the lender may, in practice, use the threat of acceleration to ensure the breaches and any underlying problems with the business are dealt with promptly. For more information on events of default and acceleration, see Practice Note: Events of default.

Many of the usual undertakings for a typical syndicated loan facility will also apply (in some form) to a project finance transaction. For information about those undertakings, including what undertakings are and why they are used, see Practice