Bond Covenant

Glossary

Banking

Bond Covenant

Bond covenants are a key component of bond documentation. They require issues contractually to keep to the terms laid out during the lifetime of the bonds. If issuers breach bond covenants, they can be declared in technical breach and will need to effect immediate cures. There is a variety of covenants and they can be positive i.e. issuers have to meet their requirements (debt-service coverage etc), or negative i.e. issuers are not permitted to take certain actions or undertake certain activities (such as takeovers, taking on more debt, or undertaking large-scale capex).

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