Mortgages sometimes contain negative deposit clauses. On the other hand, the violation of a negative deposit clause can cause a default of the loan, although a technical default. Lenders usually give an assigned time interval, for example. B 30 days, to repair a Covenant breach before proceeding with the failure procedures. 2 translations were found from examples of people on the Internet. In this case, the clause prevents the borrower from using its own assets to secure other sources of financing. If the borrower insures other loans, the initial loan will be less secure by the first institution, since the borrower now has a greater amount of debt obligations and the home institution may not have priority status for repayment. In the case of real estate mortgages, many credit agreements contain terminology that prevents the borrower from using the mortgaged property as collateral for a new loan, except in the case of refinancing. A negative deposit clause is a kind of negative covenant that prevents a borrower from mortgaging assets if it would compromise the security of the lender. This type of clause can be part of traditional bonds and credit structures. Negative deposit clauses help bondholders protect their investments. Where a bond includes a negative deposit clause, it prevents the issuer from borrowing future debt that may affect its ability to meet obligations to existing bondholders.
Do you want to add words, phrases or translations? The negative deposit clause reduces the risks for bondholders by limiting the activities in which the issuer can participate. In most cases, this means preventing the issuer from using the same assets to secure another bond. A collateral pledge entered into by Commerce on December 31, 1981, which was granted to SM RIRA by Commerce and which mortgages 48,645 SLE common shares with a par value of USD 0.50 per share, certificate number. 25 of 31 December 1981 accompanied by an entry of 31 December 1981. How can I pick up my translations in the vocabulary coach? When a financial institution grants an unsecured loan to a natural or legal person, it may include in the contract a negative deposit clause to protect itself. No translation could be found in the PONS dictionary. Seizure of shares and shareholders` rights (share guarantee contracts) Since a negative pledge clause increases the collateral of a bond issue, it often allows issuers to borrow funds at a slightly lower interest rate. This lower interest rate benefits the issuer and creates a win-win situation for both the issuer and the bondholder. A negative deposit clause also limits the likelihood that a given asset will be mortgaged more than once and thus prevents conflicts with the lending institution that is entitled to the asset in the event of default by the borrower.
Collateral Pledge Agreement of July 13, 1983 grants General Lumber & Supply Co., Inc. the seizure of shares and membership rights. All amounts held by issuer L/C in the cash guarantee account are held as security for the repayment of any L/C repayment obligation, which will subsequently result from the terms of the L/C agreement(s) and the cash seizure agreement. . . .