rate covenant

(redirected from Rate Covenants)

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.
References in periodicals archive ?
The rating also incorporates sizable, albeit manageable, capital needs and weaker-than-average rate covenants.
1x rate covenants, both systems are required to maintain a bond reserve at the lesser of maximum annual debt service on the bonds, 1.
The refinancing is being done to accommodate a change in rate covenants and to back-load principal debt.
In addition, the system plans to institute smaller, annual rate increases to ensure compliance with the rate covenants in the future.
Declining utility system revenues that may lead to violation of rate covenants on revenue bonds;
Credit weaknesses include possible delays by the Public Service Commission (PSC) in approving future rate increases, a history of periodic noncompliance with rate covenants, and a moderately concentrated customer base.
A positive consideration is that the rate increase limit under Proposition 1, which is indexed to rates of inflation and population growth, is in excess of what bond rate covenants may require and an existing automatic rate adjustment.
Under this scenario, Northwest Parkway would likely draw on the uncommitted construction funds and potentially the subordinate debt service reserve fund to pay subordinate debt service, but may also be expected to accelerate and/or raise the level of near-term planned toll increases to maintain its senior and subordinate bond toll rate covenants and preserve internal liquidity.
The city has established strong tax rate covenants and strong additional bond tests requiring no less than 3 times (x) coverage of current and future annual debt requirements.
The board frequently was unable to meet its rate covenants due to a reluctance to raise rates during hard economic times between 1988-1992.
Although operations have been tight in recent years, PGW expects to continue meeting its rate covenants which call for 1.
While this subsidy to the airlines appears to have been an effective business development technique, Fitch IBCA does not view ignoring rate covenants as a good financial management practice.