rate covenant

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Rate covenant

A provision governing a municipal revenue project financed by a revenue bond issue, which establishes the rates to be charged users of the new facility.

Rate Covenant

A provision in an indenture for a revenue bond stating guidelines for the prices that the facility the bond intends to finance is allowed to charge its customers. For example, if a revenue bond finances an electric facility, a rate covenant may state that the electric company must charge enough to cover its ongoing expenses, but not so much that it is unfair to consumers.

rate covenant

A provision for a municipal revenue bond issue that sets requirements for charging revenue on the facility that is being financed by the bond issue. For example, a rate covenant might require that the rates from customers of a city sewage plant be sufficient to ensure adequate maintenance and repair for the facility. A rate covenant is included in a bond agreement to protect the bondholders' interests.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

References in periodicals archive ?

In March 2015, policymakers asked management to explore and recommend a rate-setting policy that would automatically trigger toll rate hikes on a regular and incremental basis, consistent with inflation and legal rate covenants to ensure that adequate reserve balances are available for facility improvements.

Fitch Affirms SANDAGs South Bay Expressway Series 2017 Bonds 'A-'; Outlook Positive

Rate covenants historically had been in the 1.25X range ($1.25 in available revenues after O&M for every $1 in P&I).

Alternative financing: offers attractive solutions for sewer/water capital needs

Rate covenants of 1.4x on the first senior lien and 1.2x on the second senior lien provide greater bondholder protection over the previous debt structure.

Fitch Affirms Mid-Bay Bridge Auth, FL's 1st Sr. Lien Revs at 'BBB+' and 2nd Sr. Lien Revs at 'BBB'

Legal covenants, including rate covenants and additional bonds tests, are adequate overall.

Fitch Rates Bay Area Toll Authority, CA's Sub Toll Revs at 'AA-'; Outlook Stable

Rate covenants for the fixed rate debt and bank debt include the following: 1.25 times debt service coverage; 80 days cash on hand; 65% debt to capitalization and 1.25 cushion ratio.

Moody's affirms CentraState Medical Center's (NJ) Baa1 rating; outlook stable

The senior lien is closed with no further issuance allowed, including refunding bonds, and rate covenants apply to both senior and subordinate.

Fitch Downgrades Marin Municipal Water District Fin Auth, CA Water Revs to 'AA'; Outlook Stable

The MTI covenant includes a 1.10 times rate covenant while the bank loans have rate covenants up to 1.25 times.