a commitment of the Borrower not to create any liens/pledge over its assets in favor of other creditors, which should provide a certain risk mitigation in case of unsecured lending for all Borrowers (supposing they are Pari passu). This covenants should secure that in case of Event of Default there will be still left free of any liens assets that would be available for sale and to repay the outstanding Debts. Therefore this covenants is also taken into account for LGD calculations when considering the Capital requirements for the Bank.

Naturally, if the Borrower signs a Negative pledge in credit documentation with Citi and then provides Deutsche with a security, this situation could lead to EoD on credit contract with Citi, unless it is waived by Citi and credit contract continues. Nevertheless if the contract with Deutsche contains Cross-default clause, then EoD with Citi will trigger EoD with Deutsche as well, which means that it is good to know the financing conditions/clauses on all existing contracts. Therefore it is usually required from Borrower to deliver Compliance certificate confirming that Borrower is not in EoD and it has full-filled all conditions. Further, an LMA credit documentation even includes statement (Representations and Warranties) confirming that there is no EoD persisting in moment of credit relationship creation (meaning signing a documentation).

Negative pledge is among others (like MAC, MOC, Pari passu, Cross-default etc.) the most usual covenants applied in standardized credit contracts.