--%>

Explain Indenture

Explain the term Indenture and also describe their provisions?

E

Expert

Verified

The Indenture is a written agreement among issuer and creditors detailing words of borrowing. (As well act of trust). The indenture comprises the given provisions:

A) Bond terms:

Registered form – the ownership is recorded, payment prepared directly to owner
Bearer form – payment is prepared to holder (that is, bearer) of bond

B) Total face amount of bonds issued

C) The explanation of any property employed as security

•    Collateral – firmly speaking, pledged securities
•    Mortgage securities – protected by mortgage on genuine property
•    Debenture – an un protected debt with 10 or more years to the maturity
•    Note – a debenture with ten years or less maturity
•    Seniority – order of priority of claims

D) Subordinated debenture – of lower priority than the senior debt

E) The repayment arrangements:
Sinking fund – an account administered by the bond trustee for early on redemption

F) Any call provisions:

•    Call provision – Permits Company to “call” or re-purchase part or whole of issue
•    Call premium – amount by which the call price surpasses the par value
•    Deferred call – firm can’t call bonds for a designated period
•    Call protected – the explanation of a bond throughout the period it cannot be called

G) Any protective covenants:
•    Protective covenants – indenture conditions which restrict the actions of firms
•    Negative covenant – “thou shalt not” sell major assets, and so on.
•    Positive covenant – “thou shalt” keep working capital at or on top of $X, and so on.

   Related Questions in Corporate Finance

  • Q : Problem on binomial option pricing model

    The share price of Cheung Kong (Holdings) Limited is currently at $100. Over each of the next two three-month periods, you expect its price will either increase by 10% or fall by 10% in each three-month period. If the Hong Kong interbank offered rate is 8% per annum w

  • Q : What is Box Spread Box Spread: This is

    Box Spread: This is another strategy which seeks to exploit the arbitrage opportunities which are available in the market. In case that the options are correctly priced, this strategy would earn only the risk free rate. However, due to existence of im

  • Q : Data Case Please Assist with the

    Please Assist with the attached Data Case Assignment

  • Q : Calculated betas when they give

    Calculated betas give different information if they are acquired by using weekly, monthly or daily data.

  • Q : Affect the value of the stock Is the

     Is the value of this stock dependent on how long you plan to hold it? In other words, if your planned holding period were 2 years or 5 years rather than 3 years, would this affect the value of the stock today, P0? Explain your answer.<

  • Q : Problem on required rate of return

    Tudor Online Publishing Corporation has tax rate of 35%, debt-to-equity ratio of 25%, and has (leveraged) beta 1.25. The riskless rate is 3% and the market return is 12%. Windsor Publishing Company is an all equity company and is in the same business. What is the requ

  • Q : Efficiency Ratios Efficiency Ratios :

    Efficiency Ratios: These ratios comprise Receivables Turnover, Inventory Turnover, Asset Turnover and Net Working Capital Turnover ratios. Efficiency ratios show the utilization of Assets of the company thus as to generate Revenue that is, the best ut

  • Q : An example of use beta of Kinepolis in

    A financial consultant is valuing the company I set as an objective (an entertainment centre) by discounting the cash flows until the end of the dealership at 7.26% (interest rate on 30-year-bonds = 5.1%; market premium = 5%, and Beta = 0.47%). 0.47 is a beta provided

  • Q : Public Finance which type of tax,

    which type of tax, direct or indirect is applicable in underdeveloped countries? Why? Show your critical areas and weaknesses.

  • Q : FIN3000 Corporate Finance Task

    Task Description Length: 1000-2000 words (up to 500 words above 2000 permitted) Description: • Complete this assignment in groups of 4-5 students. • Maintain a portfolio of financial issues taken from 8 news sources. • Analyse the articles with reference to theory covered in class and highlig