Chicago Parking Meters LLC shelved a $500 million private bond sale Friday after a handful of investors insisted the company meet two covenant tests at all times, whereas the borrower wanted to have to meet either of the two.

One test required Chicago Parking Meters to maintain an investment-grade credit rating or risk having bondholders demand immediate redemption.

The other would forbid the company to borrow any more money unless its previous four months' Ebitda--earnings before interest, taxes, depreciation and amortization, a proxy for cash flow--was at least twice its interest payments on the bonds.

"They weren't a problem in themselves," one investor said of the individual covenants. Another said the problem came when a substantial enough portion of the orders was conditional on the company meeting both covenants, and Chicago Parking Meters opted not to agree.

Requiring issuing companies to maintain such a large cash-flow cushion is more typical of a high-yield, or junk, deal, according to Chris Chaice, an analyst at Covenant Review, which advises investors on such terms.

Moody's Investors Service rated the 10-year secured bonds Baa3, and Standard & Poor's rated them by and BBB-minus; both are investment-grade, although barely.

The deal was negotiated throughout the week after being announced on Monday and the issuer had initially reached an agreement with investors for a 6% coupon, before calling it off.

Barclays Capital and Credit Suisse, who were leading the sale, declined to comment on the deal.

"Chicago Parking Meters chose to postpone the transaction due to unfavorable market conditions," according to a spokeswoman at Morgan Stanley Infrastructure Partners, the majority equity holder in the ownership consortium and the asset manager. Allianz Capital Partners and the Abu Dhabi Investment Authority are co-owners; neither immediately returned a request for comment.

The consortium was selected from a tender process in December 2008 to lease Chicago's parking system for 75 years. Its $1.15 billion bid was funded with equity from the sponsors and this week's issue was its debut bond offering.

The operator of the street parking system, which is comprised of approximately 36,800 spaces, is Hartford-based LAZ Parking. As part of the agreement, the city of Chicago agreed to raise parking rates, according to a Standard & Poor's report.

-By Katy Burne and Chris Dieterich, Dow Jones Newswires; 212-416-3084; katy.burne@dowjones.com