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.
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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.
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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.