Glossary of Municipal Securities Terms

ADDITIONAL BONDS COVENANT OR TEST

The financial test, sometimes referred to as a “parity test,” that must be satisfied under the bond contract securing outstanding revenue bonds or other types of bonds as a condition to issuing additional bonds. Typically, the test would require that historical revenues (plus, in some cases, future estimated revenues) exceed projected debt service requirements for both the outstanding issue and the proposed issue by a certain ratio. See: ADDITIONAL BONDS; COVENANT.

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