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rate covenant

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Financial Dictionary

rate covenant

A provision for a municipal revenue bond issue that sets requirements for charging revenue on the facility that is being financed by the bond issue. For example, a rate covenant might require that the rates from customers of a city sewage plant be sufficient to ensure adequate maintenance and repair for the facility. A rate covenant is included in a bond agreement to protect the bondholders' interests.

Wall Street Words: An A to Z Guide to Investment Terms by David L. Scott.
Copyright © 2003. Published by Houghton Mifflin.
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