What financial covenants would you expect in an LBO credit facility, and how are the levels set?

The classic maintenance covenants are a maximum net leverage ratio (net debt/EBITDA) and sometimes a minimum interest or fixed-charge coverage ratio; capex limits appear in middle-market deals. Levels are set off the sponsor's base case with a cushion — commonly cited as roughly 25-35% EBITDA headroom (flag: convention varies by market and deal), meaning EBITDA can fall that much before a breach. In covenant-lite structures the term loan has no maintenance test at all; instead the revolver often carries a springing covenant — a first-lien leverage test that only applies when the revolver is drawn beyond a specified utilization threshold (often around 35-40%, flag). Covenant EBITDA is a defined term with negotiated add-backs, which is why definitions matter as much as levels.