Limitation on liens

(redirected from Limitations on Lien)

Limitation on liens

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

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.