Negative covenants
#fixed #income
Bondholders, rarely wish to be too specific about how an issuer should run its business because doing so would imply a degree of control that bondholders legally want to avoid.
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Negative covenantsThe common characteristic of all negative covenants is ensuring that the issuer will not take any actions that would significantly reduce its ability to make interest payments and repay the principal. Bondholders, however, rarely wish to be too specific about how an issuer should run its business because doing so would imply a degree of control that bondholders legally want to avoid. In addition, very restrictive covenants may not be in the bondholders’ best interest if they force the issuer to default when default is avoidable. For example, strict restrictions on de Summary
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