Negative pledge

Negative pledge,

Definition of Negative pledge:

  1. Provision in an unsecured loan agreement that prevents the borrower from obtaining any secured loan without the consent of the unsecured lender. A bond indenture clause that prohibits the bond issuer from pledging its assets to a third party (thus reducing the level of security for the bondholders) is an example of a negative pledge.

  2. A clause in a borrowing agreement whereby the borrower undertakes not to incur new debts or to pledge assets elsewhere without the consent of the lender; more fully negative pledge clause.

Meaning of Negative pledge & Negative pledge Definition