Debt limitation

Debt limitation

A bond covenant that restricts the firm's ability to incur additional indebtedness in some way.

Debt Limitation

A negative covenant in a bond indenture limiting the issuer's ability to acquire more debt before the bond matures. Debt limitation may take a variety of forms. For example, the indenture may restrict the debt service coverage ratio, meaning that the company can acquire theoretically unlimited debt provided it increases it income to such a level that it can service the debt. On the other hand, debt limitation may set a maximum dollar amount of debt that the issuer may acquire during the life of the bond, or even may prevent the issuer from becoming any more indebted at all. These latter debt limitations are more likely when the issuer is not on sound financial footing and possibly is issuing junk bonds. A debt limitation should not be confused with a debt limit, which is similar but is a legal requirement on a government.
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He said that domestic debt should be within 60 percent of GDP as mentioned in the Debt Limitation and Restrictions Act.
The Finance Ministry laid the fiscal statement under a provision of Fiscal Responsibility and Debt Limitation Act of 2005 that binds it to share the fiscal performance of the last year with the legislators by January every year.
On the opposing side, some elements of Fiscal Responsibility and Debt Limitation (FRDL) Act 2005 have become obsolete due to government's decision to make major amendments to the law which focus on hiding its inadequacies regarding management of public debt during its tenure.
It was also proposed that the committee should also review the debt stock of the federal and provincial governments in the perspective of Fiscal Responsibility and Debt Limitation Act (FDRLA) and discuss the position of provincial own receipts and suggest measures for enhancement of the provincial revenues and monitor cash balances of the five governments.
The report unduly criticized the changes made in Fiscal Responsibility and Debt Limitation Act, 2005.
The government has made amendments to the Fiscal Responsibility and Debt Limitation (FRDL) Act by defining the ceiling for the federal government budget deficit at four per cent of the GDP excluding foreign grants during the period 2017-18 to 2019-20 and 3.
These are credit crisis, low tax revenue collection and declining exports caused major deviation from the prescribed limit of public debt, specified in the Fiscal Responsibility and Debt Limitation (FRDL) Act 2005.
They noted that the FY 2017/18 budget aims at further gradual consolidation, albeit at a slower pace than targeted under the Fiscal Responsibility and Debt Limitation (FRDL) Act, and will likely require additional revenue measures in light of recent revenue underperformance.
Issuing of such guarantees is, however, regulated under Debt Limitation Act 2005, which stipulates that amount of guarantees issued by government should not exceed 2% of GDP in any financial year inclusive of all expenses relating to issue of such guarantees.
The overall debt pile reached around 68pc which is a violation of Fiscal Responsibility and Debt Limitation Act 2005, which binds the government to keep the total public debt below 60pc of GDP.
of GDP, set by the Fiscal Responsibility and Debt Limitation Act (2005) for FY13 onward.