Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Debt Securities definition

What does Debt Securities mean? Debt securities are tradable instruments issued by a borrower (the issuer) that evidence a debt and oblige the issuer to repay principal, usually with interest (a coupon), on scheduled dates. In practice this includes bonds, notes, debentures, loan stock, loan notes and commercial paper, typically issued in series and transferable between investors. The term is a descriptive expression used across financing, capital markets and corporate law rather than a single statutory definition, though related concepts appear in legislation and regulation (for example, “debentures” under the Companies Act and “transferable securities” under the prospectus regime). Key legal features commonly include: -...

Covenants in UK debt capital markets for investment grade issuers: issuer-dealer and bondholder/trustee undertakings, breach consequences, and the impact of CIGA 2020

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Practice notes

This Practice Note outlines what covenants are and why they are used in debt capital markets transactions, and highlights common covenants included in the documentation for a debt securities issue.

What is a covenant?

Covenants—also referred to as undertakings—are commitments either to carry out certain actions or to refrain from particular conduct. An agreement to act is a positive covenant; an agreement not to act is a negative covenant.

In debt capital markets documentation, as in finance documentation generally, covenants are employed to:

ensure the obligor provides information needed for monitoring and oversight (information covenants)
set financial targets or thresholds for the obligor (financial covenants)
define the parameters within which the obligor runs its business and deals with its assets, and impose other ongoing obligations (general covenants)

The obligor’s agreement to repay the debt and, where applicable, to pay interest and any premium, is often described as a covenant to pay...

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Web page updated on 21/05/2026

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