Exchange Currency

debt limitation

A covenant placed on a bond that restricts the issuing company from issuing more debt in the future. By placing a debt limitation, the current bond holders ensure that the company does not increase its leverage and thus increase the chances of the company defaulting. A debt limitation covenant can vary in its severity. For example, a very restrictive covenant might dictate that a firm can no longer issue any debt; this type of restriction would usually be placed if the bond holders feel that the company is in a risky industry. If bond holders feel that the company is less likely to default, they can issue a debt limitation that allows the amount of future debt issued by the company to be pegged to the amount of net income that the company is able to bring in. This allows the company to expand.

Related information about debt limitation:
  1. Debt Limitation Definition | Investopedia
    A bond covenant that limits or restricts any additional debt that may be incurred by the issuer. Debt limitations look to protect the current lenders by maintaining ...
     
  2. Debt Limitation - Financial Dictionary - The Free Dictionary
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  3. Lawriter - ORC - 5705.51 Indirect debt limitation.
    5705.51 Indirect debt limitation. (A) As used in this section: (1) “Indirect debt limit” means such limitation, in effect at the time of issuance, upon the issuance of ...
     
  4. OBM - Bonds and Investors - 5% State Debt Limitation
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  5. What is debt limitation? definition and meaning
    Definition of debt limitation: A covenant placed on a bond that restricts the issuing ... By placing a debt limitation, the current bond holders ensure that the ...
     
  6. 50 ILCS 405/ Local Government Debt Limitation Act.
    (50 ILCS 405/0.01) (from Ch. 85, par. 850) Sec. 0.01. Short title. This Act may be cited as the Local Government Debt Limitation Act. (Source: P.A. 86-1324.) ...
     
  7. Dry-Hole Agreements and Debt Limitation Provisions: The Lessons ...
    IV analyzes debt limitation provisions to determine whether the mu- nicipalities ... A debt limitation provision prevents a municipality from entering into projects ...
     
  8. What Is a Debt Limitation?
    A debt limitation is a mechanism that restricts the ability of a lender to take on additional risk by extending additional credit or funding to a client. The idea behind ...