Oracle Systems Corp has accepted an $80m reduction in its bank line of credit to $170m from $250m in return for less onerous loan covenants: loan covenants typically set minimum net worth and capital adequacy requirements, and if the company defaults on these – which may have come close under the superseded agreement when Oracle reported a fiscal first quarter loss – it is deemed to be in default and must renegotiate its bank loans with the threat that the loan will be called in, which in turn could push the unhappy defaulter into bankruptcy proceedings and in general would likely force the company to pay a higher rate of interest; no doubt Oracle was able to persuade its bankers that rules set in an earlier stage in its development were no longer appropriate to a financially robust billion dollar company.
