Series 79: Terms Of Credit Agreements And Indentures

Terms of Credit Agreements and Indentures

You may be tested on your understanding of terms used in credit agreements and indentures (agreements between bond issuers and bondholders). At a minimum, you should know the following terms:

• • Repayment refers to the act of paying back money borrowed from a creditor. Depending on the context, the term can refer to repayment in installments over time or can refer to final repayment of the loan—for example, where payments have been interest-only and the principal is repaid in a lump sum.
• • Prepayment is simply repayment of a loan or other debt obligation before it is due or mature. A credit agreement or indenture may completely prohibit voluntary prepayments, may allow prepayments but require the borrower to pay a penalty or premium, or may have no prepayment restriction at all.
• • Events of default are events specified in a credit agreement that al