hard · Debt Capital Markets
An issuer has a 'Negative Pledge' covenant in its bond indenture. This covenant primarily functions to:
- Restrict the issuer from granting liens to other creditors without providing equal security to the bondholders.
- Prohibit the company from ever issuing secured debt.
- Force the company to maintain a minimum liquidity level.
- Prevent the issuer from paying dividends while debt is outstanding.
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