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3 June, 08:57

Restrictive covenants are designed primarily to protect bondholders by constraining the actions of managers. Such covenants are spelled out in bond indentures. True or False

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  1. 3 June, 09:49
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    Answer: True

    Explanation: Restrictive Covenants are often spelled out in bond indentures or bond covenants.

    A bond covenant refers to an agreement which is legally binding between a bond issuer and a bondholder. Bond covenants are designed to protect the interests of both parties involved in the agreement.

    Therefore, restrictive covenants as spelled out in the bond indentures are issued in order to forbid the issuer from undertaking certain activities.
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