Bond Covenant

Bond Covenant
A legally binding term of an agreement between a bond issuer and a bond holder. Bond covenants are designed to protect the interests of both parties. Negative or restrictive covenants forbid the issuer from undertaking certain activities; positive or affirmative covenants require the issuer to meet specific requirements.

Possible bond covenants might include restrictions on the issuer's ability to take on additional debt, requirements that the issuer provide audited financial statements to bond holders and limitations on the issuer's ability to make new capital investments. When an issuer violates a bond covenant, it is considered to be in technical default. A common penalty for violating a bond covenant is the downgrading of a bond's rating, which could make it less attractive to investors and increase the issuer's borrowing costs.


Investment dictionary. . 2012.

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  • Bond covenant — A contractual provision in a bond indenture. A positive covenant requires certain actions, and a negative covenant limits certain actions. The New York Times Financial Glossary * * * bond covenant UK US noun [C] LAW, FINANCE ► a written promise… …   Financial and business terms

  • bond covenant — A contractual provision in a bond indenture. A positive covenant requires certain actions, and a negative covenant limits certain actions. Bloomberg Financial Dictionary * * * bond covenant UK US noun [C] LAW, FINANCE ► a written promise in a… …   Financial and business terms

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  • covenant — cov·e·nant / kə və nənt/ n 1: an official agreement or compact an international covenant on human rights 2 a: a contract in its entirety or a promise within a contract for the performance or nonperformance of a particular act a covenant not to… …   Law dictionary

  • bond — 1 n 1 a: a usu. formal written agreement by which a person undertakes to perform a certain act (as appear in court or fulfill the obligations of a contract) or abstain from performing an act (as committing a crime) with the condition that failure …   Law dictionary

  • bond — bond1 [bänd] n. [ME bond, band: see BAND1] 1. anything that binds, fastens, or restrains 2. [pl.] a) fetters; shackles b) Archaic imprisonment; captivity 3 …   English World dictionary

  • bond — [n1] binder or fastener band, binding, chain, connection, cord, fastening, fetter, gunk, handcuff, hookup, irons, ligature, link, linkage, manacle, network, nexus, rope, shackle, stickum*, tie, tie in, wire; concept 497 bond [n2] association,… …   New thesaurus

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  • bond — I (New American Roget s College Thesaurus) n. union, connection, tie; accord, sympathy; guaranty, pledge; shackle. See relation, security, connection, restraint. II (Roget s IV) n. 1. [A physical tie; often plural ] Syn. shackle, linkage, chain;… …   English dictionary for students

  • bond — A certificate or evidence of a debt on which the issuing company or governmental body promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. A long term debt… …   Black's law dictionary

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