Suppose a potential bondholder requires an indenture agreement to include a limit on dividend distributions by the bond's issuer and also a restriction on the sale of the issuer's assets.In this case,the bondholder is most likely concerned about:
A)shareholder claims being diluted.
B)shareholders claiming all of the residual profits of the firm.
C)increasing interest rates.
D)shareholders transferring firm assets to themselves.
E)shareholders earning a higher return on their investment in the firm than the bondholders earn on their debt.

Question

Quizplus · Accepted Answer

The bondholder is concerned about shareholders transferring firm assets to themselves, which could jeopardize the bondholder's claim on the firm's assets.

Suppose a Potential Bondholder Requires an Indenture Agreement to Include