(finance) A type of loan or loan condition in which the borrower agrees with the lender not to allow any other lender or creditor to rank ahead for payment in the event of a liquidation. Such a loan is unsecured (ie. not backed by a charge over specific assets). Hailed as a great innovation when developed in the 1970s, but by the end of the 1980s had become a dirty word.
Origin of negative-pledge
- The idea (hence presumably the name) developed in the United States, and then went global. (Reference: Trevor Sykes, The Bold Riders, second edition, 1996, ISBN 1-86448-184-6, page 8.)