Financial Terms
Limitation on subsidiary borrowing

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Definition of Limitation on subsidiary borrowing

Limitation On Subsidiary Borrowing Image 1

Limitation on subsidiary borrowing

A bond covenant that restricts in some way a firm's ability to borrow at
the subsidiary level.



Related Terms:

Debt limitation

A bond covenant that restricts in some way the firm's ability to incur additional indebtedness.


Dividend limitation

A bond covenant that restricts in some way the firm's ability to pay cash dividends.


International finance subsidiary

A subsidiary incorporated in the U.S., usually in Delaware, whose sole
purpose was to issue debentures overseas and invest the proceeds in foreign operations, with the interest paid
to foreign bondholders not subject to U.S. withholding tax. The elimination of the corporate withholding tax
has ended the need for this type of subsidiary.


Limitation on asset dispositions

A bond covenant that restricts in some way a firm's ability to sell major assets.


Limitation on liens

A bond covenant that restricts in some way a firm's ability to grant liens on its assets.



Limitation on merger, consolidation, or sale

A bond covenant that restricts in some way a firm's ability to
merge or consolidate with another firm.


Limitation on sale-and-leaseback

A bond covenant that restricts in some way a firm's ability to enter into
sale and lease-back transactions.


Limitation On Subsidiary Borrowing Image 2

Offshore finance subsidiary

A wholly owned affiliate incorporated overseas, usually in a tax haven country,
whose function is to issue securities abroad for use in either the parent's domestic or its foreign business.


Subsidiary

A foreign-based affiliate that is a separately incorporated entity under the host country's law.


Subsidiary account

An account that is kept within a subsidiary ledger, which in turn
summarizes into the general ledger.


Subsidiary company

A company that is controlled by another company through ownership
of the majority of its voting stock.


Subsidiary ledger

An accounting record giving the detailed transactions in an account; the subtotals of the debits and credits are posted to the control account maintained in the general ledger. It helps to keep the general ledger free of clutter.



 

 

 

 

 

 

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