Indenture

An indenture is the legal agreement between a bond issuer and the bond purchasers. An indenture specifies all aspects of the bond arrangement, including the following:

  • Bond maturity date

  • Timing of interest payments

  • Method used to calculate interest

  • Any actions triggered if bond payments are not made

  • Any call features under which the issuer can buy back bonds early

  • Any conversion features, where bond holders can convert the bonds into the equity of the issuer

  • Any covenants that the issuer must observe during the term of the bonds

In essence, an indenture states all aspects of a bond arrangement, including how the parties interact under all possible scenarios, such as bond calls, bond conversions, covenant breaches, and the nonpayment of interest.

Related Courses

Corporate Cash Management 
Corporate Finance 
Treasurer's Guidebook