Question

What is a bond indenture? What parties are usually associated with it? Explain why.

Answer 1

Question-- what is a bond indenture? What parties are usually associated with it? Explain why.

Definition: A bond indenture is a legal document or contract between the bond issuer and the bondholder that records the obligations of the bond issuer and benefits owed to the bondholder. The bond indenture also includes the details of the rights of ownership as well as the rights of the bondholder to receive interest payments and principle payments in the future.

The bond indenture is created during the bond issuing process when bond issuers are receiving approval from state and federal governments to issue bonds to the public. After an agreed upon amount of bonds is authorized by the applicable government agency, the company issuing the bonds must contract a bond indenture.

The bond indenture (aka trust indenture, deed of trust) is a legal contract between the issuer and the trustee that specifies the scope and the responsibilities of the borrower, the trustee, and the lender, and the characteristics of the bond, such as the maturity date, coupon rate, and so on.

Below are some of the common types of indentures and clauses that may be associated with indenture contracts.

Real Estate Indenture

In real estate, an indenture is a deed in which two parties agree to continuing obligations. For example, one party may agree to maintain a property and the other may agree to make payments on it.

Bankruptcy Indenture

In bankruptcy law, an indenture may be referenced as proof of a claim on property. Indentures in general provide details on collateralized property, constituting the claim a lender has against a debtor, usually secured with a lien on the debtor's property.

Credit Indentures

A credit indenture is the underlying contract agreement that details all of the provisions and clauses associated with a credit offering.