Net Revenue Pledge

Net Revenue Pledge

A provision in a municipal bond issue that requires the issuing municipality to use net revenues (revenues left after expenses) from the project being financed to pay first the debt service costs of the issue.

Notes:

Similar to other restrictive provisions contained in bond indentures, a net revenue pledge serves to make the bond issue less risky for bondholders. Since the pledge effectively forces the government to use revenue from its debt-financed projects to pay debt service costs first, bondholders enjoy a reduced risk of default.

See also: Indenture, Municipal Bond, Project Finance, Revenue Bond