Additional Bonds Test:

Additional Bonds Test:

A requirement that before additional bonds, which will be secured by assets or revenues already pledged to existing bonds, can be issued, that specific financial requirements must be met. Generally, the main requirement is that debt service coverage for the original and new bonds must be at a specific level. See also: Open-end indenture.

Open – end indenture:

A secured bond indenture that allows the repledging of collateral for additional bonds. Usually subject to certain limitations. See also: Additional bond test.

Debt Service:

The yearly amount of interest and principal payable on a bond issue.

Debt:

A legal obligation to pay. The written agreement promising to pay is known as debt instrument . Examples include bonds, notes, bills, mortgages, etc.

Note: the additional bond test is a formula to test that the issuer of additional debt can pay this debt back with it’s current obligations.