Negative pledge

A negative pledge is a clause or agreement in a loan or credit contract where the borrower promises not to provide any collateral or security interest to other lenders that would have priority over the lender's claim. In simple terms, it means that the borrower cannot pledge any of its assets as collateral to other creditors, ensuring that the lender has a higher priority in recovering its debt in case of default. This clause provides an additional level of protection to the lender.