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A negative pledge is a clause in a loan agreement that prohibits a borrower from pledging any of its assets to other lenders as collateral, thereby ensuring that the lender's interests are protected. For example, a company might agree not to secure additional loans with its real estate holdings, ensuring that the original lender has priority in claims against those assets. This clause helps maintain the lender's position in case of default and minimizes the risk of asset dilution. Another example is a bond indenture where the issuer commits to not securing future debt with specific assets, preserving the value of existing bondholders' claims.

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