Net Revenue Pledge

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Net Revenue Pledge

A provision in some municipal bonds requiring the issuer to use the revenue the bond raises after expenses to pay for the debt service. For example, if a bond issue raises $10 million, but the project it intends to finance only costs $8 million, a net revenue pledge would require the issuer to use the remaining $2 million to service the debt from the bond. A net revenue pledge exists in order to make the municipal bond less risky for investors; a bond indenture that contains a net revenue pledge is more likely receive a higher credit rating than one that does not have one.
References in periodicals archive ?
However, underlying obligation security provisions are strong, with most obligations secured by water and/or sewer net revenue pledges.
Following the refunding of a portion of these bonds, outstanding bonds secured with prior net revenue pledges are expected to decline to less than $38 million.