7.12 The Bond Indenture
The bond indenture is a three-party contract between the bond issuer, the bondholders, and the trustee. The trustee is hired by the issuer to protect the bondholders’ interests. (What do you think would happen if an issuer refused to hire a trustee?)
The indenture includes
- The basic terms of the bond issue
- The total amount of bonds issued
- A description of the security (if any)
- Repayment arrangements
- Call provisions
- Details of the protective covenants