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Lopezj273 Lopezj273
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Posts: 447
4 years ago
Why do the issuers of bonds not seek to minimize the strength and number of covenants in a bond agreement?

Covenants lower the interest rate investors will require to buy the bond.



▸ Covenants can increase the flexibility of the company issuing the bond.

Covenants force the company to renegotiate the terms of the bond if they are broken.



▸ Covenants favor the equity holders that managers work for.
Textbook 
Fundamentals of Corporate Finance

Fundamentals of Corporate Finance


Edition: 2nd
Authors:
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antheadanthead
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4 years ago
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Lopezj273 Author
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4 years ago
Smart ... Thanks!
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Yesterday
Thanks
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2 hours ago
Helped a lot
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