Limitation on asset dispositions

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Limitation on asset dispositions

A bond covenant that restricts in some way a firm's ability to sell major assets.

Limitation on Asset Dispositions

A provision in some bond indentures limiting the issuer's ability to sell certain stated assets. A limitation on asset dispositions reduces the risk to bondholders that the issuer will sell its assets and then default on the bond, which would mean that the bondholders would be completely unable to recover their investments. See also: Secured bond.
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This payment will permit Simec to cancel the industrial mortgage securing the bank debt and no longer comply with various bank covenants including a limitation on asset dispositions and required application of proceeds from such dispositions.