Limitation on liens

Limitation on liens

A bond covenant that restricts in some way a firm's ability to grant liens on its assets.

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Limitation on Liens

An aspect of some bonds in which the issuer is only allowed to grant liens on its assets in certain circumstances. A bond with a limitation on liens generally carries lower risk because, in the event of default, the issuer's assets have fewer liens from secured creditors. This means that the bondholders have a higher priority on the proceeds of liquidation.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved