Additional Bond Test Law and Legal Definition

Additional Bond Test is an income test, which ascertains that revenues must meet certain levels to allow the sale of additional bonds against the financed facility. A provision in the trust indenture of an open end revenue bond. It is a financial statement that a company must issue before making a new issue of a bond. The additional bonds test shows what assets the potential issuer has available to pay coupons on the bond. It helps ensure the issuer is able to service debt on the new issue. The additional bonds test increases the transparency of the market and helps one accurately gauge the risk of the new bond issue.