Protective covenant

Protective covenant
Definition: [crh] A part of an indenture or loan agreement that limits certain actions a company may take during the term of the Definition: HREF="/?rd=loan"loan to protect the lender's interests.

Protective covenant
A part of an indenture or loan agreement that limits certain actions a company may take during the term of the loan to protect the lender's interests.

Protective Covenants Clauses in a loan agreement aimed at reducing default risk to the bondholders.

protective covenant
restrictive covenant
affirmative covenant
commercial and industrial (C&I) loan
deed restriction
loan covenant
restrictive covenant ...

Also called indenture covenants or protective covenants. Contractual terms of the loan or indenture agreement that prohibit the debtor from taking actions that might hurt the interests of the lenders or bondholders.

Written agreement specifying the terms and conditions for issuing bonds, stating the form of the bond being offered for sale, interest to be paid, the maturity date, call provisions and protective covenants, if any, collateral pledged, ...

Corporate bonds that include protective covenants, such as poison puts, are given event risk covenant rankings by Standard & Poor's. Ratings range from E-1 (highest) to E-5 (lowest). Covenant rankings are supplemental to basic bond ratings.

Bondholders and stockholders may have interests in a corporation that conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective covenants in bond documents work to resolve these conflicts.

These securities generally have a term of 30 to 40 years, pay a fixed rate monthly or quarterly income, offer five years of call protection, and benefit from various protective covenants usually associated with subordinated debt.

Notion that governments should protect domestic industry from import competition by means of tariffs, quotas, and other trade barriers.
Protective covenant ...

Protective covenants work to resolve these conflicts. Conglomerate A firm engaged in two or more unrelated businesses. Conglomerate merger A merger involving two or more firms that are in unrelated businesses.

Protective covenants in bond documents work to resolve these conflicts. Conforming loans Mortgage loans that meet the qualifications of Freddie Mac or Fannie Mae, which are bought from lenders and issued as pass-through securities.

See also: Internal rate of return, Convertible Bond, PIK, Total capitalization, Payment-in-kind