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Answer: The bond’s indenture contains a negative-pledge clause
**Correct answer: C** A **senior debenture** is unsecured debt. A common protection for debenture holders is a **negative-pledge clause**, which restricts the issuer from pledging assets to other creditors. - **A** is unrelated and false. - **B** is false because debentures are still issued under an **indenture**. - **D** is false because a **covered bond** is a specific secured structure and is not the same thing as a senior debenture.
Author: Manit Arora
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Question 506.2. Galaxy Corporation has issued a senior debenture to investor Barry Brown. Which of the following is most likely to be TRUE about this debenture?
A
Investor ABC has no claim on the property of Acme
B
Because it is a debenture, an indenture is not required
C
The bond’s indenture contains a negative-pledge clause
D
Due to its seniority, this debenture could also be called a "covered bond"
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