Thanks, that makes more sense to me, although madamswer...

Thanks, that makes more sense to me, although madamswer suggested that covenants would not be set based on intangibles. Myself, I do not have any insight into this. To me, this would seem a poor approach to lending, as the lender would never expect to be able to recover that value in an asset sale. It would make sense if it could be reliably tied to a certain profit level. But if so, the right down would correspond with reduced profitability in any event. So why not just tie it to actual profitability? I think it would be too tenuous to make a loan on the basis of these intangibles, and the company would be putting itself at unthinkable risk. Do you have concrete instances of this occurring?