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When taking out a corporate bond, there is risk involved as companies can default on their bond repayments. Investors are aware of this risk and so when the bond is drawn up (bond indenture) the contract normally includes a number of restrictive covenants that prevent the company from defaulting purposely or increasing its option to default on purpose.
Possible convenants may include:
the company having to maintain its working capital above a certain level i.e level of debt to assets.
cant sell its assets without approval
a promise to provide certain financial statements to the lenders
etc
What else can I help you with?
What are surety benefits?
If you are asking what are the benefits built into a surety bond then the answer is the surety bond guarantees a specific performance or amount up to the penalty amount of the bond. If you are asking what the benefits of surety are then surety provides the recipient of the surety bond a level of assurance that the person or business entity providing the bond is qualified to perform the required act. This is accomplished by the surety's investigation of the Principal and evidenced by their agreement to issue the surety bond that encumbers the surety to the amount of the bond's penalty.
What is a bearer bond?
A bearer bond is a negotiable loan instrument which is payable to its holder by the issuer according to preset conditions.
What is a notary bond?
Notaries in most states are required to post bond, ranging anywhere from $1,000 to $10,000. The bond is obtained through an insurance agent and lasts for the full term of office (4 years in most states).
If issued a bid bond can surety not issue a payment bond?
Yes. If the bid spread is significant, and or if the financial situation of the contractor changes beyond the comfort level of the surety between the bid and award, or if the final bond is contingent on receiving info.
What is an on demand payment bond?
This is a type of credit enhancement that guarantees payment of an obligation and must be paid by the enhancer on the demand of the note or bond holder.
The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the?
bond indenture
What is a bond indenture What provisions are usually included in it?
A bond indenture is a legal document outlining the terms and conditions of a bond issuance. Provisions typically included in a bond indenture cover details such as payment terms, interest rates, maturity dates, covenants, collateral, and potential remedies for the bondholders if the issuer defaults.
Difference between bond agreement and bond indenture?
What is the difference between a bond agreement and a bond indenture?Bond Agreement: A contract for privately placed debt.Bond Indenture: A blanket agreement between a corporation and its bond holders that states the interest rate, maturity date, and other terms and conditions of the bond issue.Based on these two definitions a bond agreement is more of a private agreement between the company and the bond purchaser where the bond indenture is more of a legal agreement. Bond agreement could get complicated if it isn't a trusted person where the bond indenture appears as a contractual agreement to keep people honest.
What is a legal document that outlines all of the conditions of the bond?
A bond indenture.
Is a bond indenture is a bond with no specific collateral securing it?
No, a bond indenture is a legal document that outlines the terms and conditions of a bond issue, including the rights and responsibilities of the issuer and bondholders. A bond with no specific collateral securing it is typically referred to as an unsecured bond or debenture.
What is the legal contract setting forth the terms and provisions of a corporate bond called?
indenture
What is a provision on a bond which provides for the systematic retirement of the bond prior to their maturity?
A provision on a bond that provides for the systematic retirement of the bond prior to maturity is known as a sinking fund provision. This provision requires the issuer to set aside funds on a regular basis to repay a portion of the bond issue before it matures, reducing the overall debt burden.
What is a covenant bond?
A covenant bond is a type of debt security issued by a corporation that includes specific terms and conditions, known as covenants, that the issuer must adhere to. These covenants typically include restrictions on the company’s financial activities to protect the interests of bondholders. Violating these covenants can lead to penalties or default on the bond.
What are the two types of indent agents?
The two types of indent agents are indentures who act as middlemen to connect buyers and sellers in financial markets, and indenture trustees who are responsible for enforcing the terms of a bond indenture on behalf of bondholders.
How can one determine the face value of a bond?
To determine the face value of a bond, look at the bond certificate or the bond indenture. The face value is the amount that the bond issuer promises to pay back to the bondholder when the bond matures. It is also known as the par value or principal amount of the bond.
What is a financial covernant?
A financial covenant is a clause in a loan agreement or bond indenture that requires the borrower to maintain certain financial metrics or ratios, such as debt-to-equity or interest coverage ratios. These covenants are designed to protect lenders by ensuring that the borrower remains financially stable and capable of repaying the loan. If the borrower fails to meet these requirements, it may trigger penalties, including higher interest rates or loan default. Financial covenants help maintain transparency and accountability between borrowers and lenders.
What is it called if he terms and conditions to which a bond is subject are set forth?
It is called the bond indenture. This legal document outlines the terms and conditions of the bond issuance, including the principal amount, interest rate, maturity date, and other relevant terms agreed upon by the issuer and bondholders.
