Clauses in the indenture agreement that limit the actions of a bond issuer as a safeguard for bondholders are referred to as _____ and include such features as _____.

Question

Quizplus · Accepted Answer

Clauses in the indenture agreement that limit the actions of a bond issuer as a safeguard for bondholders are referred to as protective covenants, and include features such as a restriction on the sale of company assets. This is an important safeguard for bondholders as it ensures that the issuer cannot dispose of key assets without their approval, which could otherwise jeopardize the company's ability to repay the bond. The other options are incorrect as deferred clauses do not refer to limitations on actions, and the features listed do not provide the same safeguard as a restriction on the sale of company assets.

Clauses in the Indenture Agreement That Limit the Actions of a Bond