Maintenance covenants are tested every quarter; incurrence covenants bite only when the company does something specific such as raising debt or paying a dividend. Breaching a maintenance covenant usually gives lenders the right to demand repayment.
Covenants are defined on the lender's own adjusted measures, not on reported figures, and those definitions live in the credit agreement filed as an exhibit to the form-10-k. A company can be comfortably within covenant on a definition that bears little resemblance to ebitda as reported.
Example: Northwind's term loan requires net leverage below 3.5 times and coverage above 3.0 times. At 1.7 times and 6.7 times the headroom is wide, absorbing roughly a 45% EBITDA decline.
Related: net-debt-to-ebitda, interest-coverage-ratio, refinancing-risk, going-concern, form-10-k