BU393 Lecture Notes - Lecture 5: Subordinated Debt, Sinking Fund, Financial Ratio
Document Summary
Similar to a prospectus, an indenture is needed for the public issue of bonds to occur. A written agreement between the corporation and the trust company (aka. The trust company is appointed by the corporation to represent the bondholders in a public issue. Description of the property used as a security/ collateral. Lists all restrictions placed on firm by the lenders, which are known as restrictive covenants. Security: a form of attachment to property, providing that property can be sold in the event of default to satisfy the debt for which the security is given. Essentially a security is classified according to a specific collateral protecting the bondholders. Collateral trust bonds involve a pledge of common stock held by a corporation and mortgage securities that are secured by real estate. Debentures are unsecured bonds and holders can claim assets that are not already pledged as collateral in other debt transactions. Seniority: refers to preference in position over other lenders.
