Limitation on Indebtedness
Category — Covenants
Limitation on Indebtedness -a covenant that limits or restricts any additional debt that may be incurred by the issuer. Debt limitations look to protect the current lenders by maintaining the firm’s degree of leverage. The purpose of the Limitation on Indebtedness Covenant is to limit the amount of additional debt that may be incurred by the Credit Group unless cash flow is sufficient to service all debt.