Negative pledge

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A negative pledge is an covenant a borrower makes to one lender not to create security over its assets in favour of another lender. A rather bankery thing — if obeyed, it preserves a fellow’s jostling space at the bar should the counterparty go to hell — but does, rather, cramp a young undertaking’s style.

Thus, much more fashionable in the olden days than now, and probably the genesis of the curious No event of default or potential event of default representation we all know, love and routinely pass over when perusing our counterparty’s early draft. (we can’t think of any other reason for it, that is to say).

See also

• Representations and Warranties Anatomy