Negative Pledge

A covenant that is the opposite of a Pledge – a promise not to Pledge property, generally money or other intangibles, to any party other than the Issuer, a Letter of Credit provider or other intended beneficiary of the Negative Pledge.  A Negative Pledge can be structured in Tax-Exempt Bond financings under a safe harbor in the Treasury Regulations to provide some security to a Letter of Credit provider without causing the Issuer’s or the Conduit Borrower’s money to become subject to the Arbitrage requirements under the Code.

In Contrast With


A promise to set aside, dedicate and use exclusively for specified purposes certain categories of property, generally money or other intangibles.

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Term of the Week


A meeting of all the parties prior to the closing, often held the day before the closing.