Restrictive covenants are designed so as to protect both the bondholder and the issuer even though they may constrain the actions of the firm's managers. Such covenants are contained in the bond's indenture.

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Restrictive covenants serve to protect both the bondholder and issuer, and are included in the bond's indenture. While they may limit the actions of the firm's managers, they are designed to ensure that the bond remains a safe investment for the bondholder.

Restrictive Covenants Are Designed So as to Protect Both the Bondholder