Which of the following provisions would often be included in the indenture for a first-mortgage bond?
A)A limit on officer salaries
B)A negative pledge clause
C)A limit on new issues of subordinated debt
D)A limit on the amount of senior debt that can be issued

Question

Quizplus · Accepted Answer

A first-mortgage bond indenture typically includes a limit on the amount of senior debt that can be issued to protect the interests of existing bondholders by ensuring that the company does not take on excessive senior debt that could jeopardize their claims.

Which of the Following Provisions Would Often Be Included in the Indenture