a promise by a borrower not to place any further liens (=the use of an asset as security for a debt) on its assets Floating charges almost always contain negative pledges to protect the bank's security.
- The borrower has to give negative pledges instead of providing security for the loan.
- Sometimes the negative pledge is not absolute because it allows the borrower to place further liens on the security subject to the permission of the first creditor.
- A negative pledge not to sell any property held by the company was accepted by the bank.
- A bond indenture clause that prohibits the bond issuer from pledging its assets to a third party is also an example of a negative pledge.