Loan Covenant

1. Loan covenants are provisions in a bond indenture. The covenants can be either affirmative covenants or negative covenants. Affirmative covenants contain the activities that the issuer promises to do, such as a promise to pay interest and principal on a timely basis, a promise to keep certain assets (the collateral) in good condition and in working order, or a promise to submit periodic reports to the trustee. Negative covenants contain limitations and restrictions on the issuer's activities, such as restrictions on the issuer's ability to issue additional debt. See also bond indenture. Clauses in a loan agreement that require one party to do, or refrain from doing, certain things.