An undertaking given by a borrower to a lender that the borrower will not undertake further loans without the lender's approval or in excess of a defined ratio and that the future borrowing will not rank ahead of existing loans.
A loan covenant where a hospital agrees not to mortgage its facilities in the future while debt being borrowed remains outstanding.
A negative pledge co-op loan is a loan which exceeds the financing limit permitted or recognized by a co-op corporation. Because the co-op board does not approve or recognize any portion of the loan which exceeds the board's financing limit, the lender's rights, in the event of a default, are severely limited with respect to the unrecognized portion of the loan. Essentially, the bank's rights against the stock and proprietary lease, in the event of a default, are subordinate to the co-op corporation's rights to collect back maintenance and control the sale of the apartment. Consequently, only the most sophisticated banks are able to analyze and underwrite these negative pledge loans for very well qualified borrowers.
An undertaking given by a borrower to a bank not to create any other secured indebtedness, (whether ranking before or after the bank) without its consent - usually as part of the bank's standard documents
A covenant whereby a borrower undertakes not to allow the creation or subsistence of secured debt or, if the borrower has the right to issue secured debt in the future, not to secure such new debt without offering the same security equally (i.e. pari passu). Negative pledges are normally subject to numerous exceptions.
A pledge not to dispose of, transfer or encumber a particular pledged asset before expiration of the pledge
A negative pledge is a provision in a contract which prohibits a party to the contract from creating any security interests over certain property specified in the provision.
