Negative Pledge
Short definition
A negative pledge is an undertaking not to grant security to another creditor except for listed carve-outs. It protects the unsecured creditor against a later secured stack.
Detailed explanation
Carve-outs: existing charges, liens by law, a permitted LTV basket, equal security. A breach is a stealth second mortgage or a new secured loan.
Bonds and unsecured bank packs rest on this clause. A breach can cross-default.
Why it matters for the CFO
Later secured financing goes through this gate — or does not. An unmapped mortgage breaks the whole unsecured pack.
How to read it
The tighter the permitted-security basket, the less flexibility.
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Definitions are educational. They are not investment, credit or tax advice.