negative covenant

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Related to negative covenant: Negative pledge, Affirmative Covenants

Negative covenant

A bond covenant that limits or prohibits certain actions unless the bondholders agree.

Restrictive Covenant

A bond covenant that forbids the issuer from taking certain actions. For example, a restrictive covenant may prevent an issuer from issuing more debt until the bond matures. More commonly, a restrictive covenant limits the dividends an issuer may pay to shareholders so as to reduce the risk to the bond. It contrasts with a positive covenant, which requires the issuer to take certain enumerated actions. It is also called a negative covenant.

negative covenant

A clause in a loan agreement that prohibits the borrower from an activity. For example, a negative covenant may restrict the payment of dividends or the issuance of new debt. Compare positive covenant.
References in periodicals archive ?
The credit facility is secured by Santarus' assets, excluding intellectual property, and contains affirmative and negative covenants, including certain financial covenants.
The Notes will mature on November 28, 2013 and contain customary affirmative and negative covenants of the Company.
The terms of the new facility are substantially similar to the Company's previous revolving credit facility and include a customary financial covenant governing total leverage as well as negative covenants limiting subsidiary indebtedness and certain other items typical for investment grade-rated borrowers.
The Notes will mature on August 21, 2013 and contain customary affirmative and negative covenants of the Company.
The Agreement is now unsecured and subject to customary affirmative and negative covenants for credit agreements of this type.
Customary affirmative and negative covenants for a senior facility of this kind, including those governing total leverage, senior leverage and fixed charge coverage.
As part of that redetermination, we have initiated discussions regarding an amendment to one of the negative covenants in the credit agreement, which prohibits us from allowing, as of the last day of any fiscal quarter, our ratio of Total Debt (as of such day) to EBITDAX (for the immediately preceding four fiscal quarters ending on such day) to be greater than 4.