What are bond indentures?
Bond indenture (also trust indenture or deed of trust) is a legal document issued to lenders and describes key terms such as the interest rate, maturity date, convertibility, pledge, promises, representations, covenants, and other terms of the bond offering.
What is meant by bond indenture?
It specifies the important features of a bond, such as its maturity date, the timing of interest payments, method of interest calculation, callability, and convertible features, if applicable. A bond indenture also contains all the terms and conditions applicable to the bond issue.
What is the purpose of a bond indenture agreement?
An indenture agreement is the formal contract between a bond issuer and the bondholders. It sets forth the details of all the terms and conditions of the bonds, such as the exact day of their maturity, the timing of the interest payments and how they are calculated, and the details of any special features.
Who uses bond indentures?
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, and the coupon rate.
What parties are associated with bond indentures?
Thus, we can say there are three persons involved in the bond indenture, namely the issuer, the bondholder, and the fiscal agent/trustee.
How do you calculate bond indentures?
Usually you’ll find bond indentures and other related documents in the “Exhibits” of a 10-k, which are usually found at the bottom of the document.
Is bond a debt or equity?
For example, a stock is an equity security, while a bond is a debt security. When an investor buys a corporate bond, they are essentially loaning the corporation money, and have the right to be repaid the principal and interest on the bond.
Is an indenture the same as a mortgage?
(7) The term “indenture” means any mortgage, deed of trust, trust or other indenture, or similar instrument or agreement (including any supplement or amendment to any of the foregoing), under which securities are outstanding or are to be issued, whether or not any property, real or personal, is, or is to be, pledged, …
What is the difference between an indenture and a deed?
As nouns the difference between indenture and deed
is that indenture is (legal) a contract which binds a person to work for another, under specified conditions, for a specified time (often as an apprentice) while deed is an action or act; something that is done.
What does indenture mean in real estate?
1) Generally, any written agreement between two parties. 2) A real estate deed in which two parties agree to continuing obligations; for example, one party may agree to maintain the property and the other to make periodic payments.
What is a Warrant indenture?
A warrant indenture between a corporate issuer and a warrant agent providing for the issuance of warrants. This Standard Document has integrated drafting notes with important explanations and drafting and negotiating tips.
Do bonds have covenants?
Understanding Bond Covenants
All bond covenants are part of a bond’s legal documentation and are part of corporate bonds and government bonds. A bond’s indenture is the portion that contains the covenants, both positive and negative, and is enforceable throughout the entire life of the bond until maturity.
What do you mean by sinking fund?
A sinking fund is a fund containing money set aside or saved to pay off a debt or bond. A company that issues debt will need to pay that debt off in the future, and the sinking fund helps to soften the hardship of a large outlay of revenue.
Is bond sinking fund a cash?
The bond sinking fund is a noncurrent (or long-term) asset even if the fund contains only cash. The reason is the cash in the sinking fund must be used to retire bonds and cannot be used to pay current liabilities.
What is a bond sinking fund classified as?
The bond sinking fund is categorized as a long-term asset within the Investments classification on the balance sheet, since it is to be used to retire a liability that is also classified as long term.
What is the difference between an emergency fund and a sinking fund?
Simply put, while your emergency fund should be reserved for something that comes at you unexpectedly, the idea of a sinking fund is to save for a specific and planned expense.
When would you use a sinking fund?
A sinking fund can be used to pay for home repairs, save for a new car, pay for your vacation, or cover large medical bills. By setting the money aside before you use it, you will avoid using your emergency fund unnecessarily. Plus, you give yourself more negotiating power when it is time to purchase.
What are examples of sinking funds?
Some other common examples of sinking funds are home repairs, medical expenses, vacations, Christmas gifts, building an emergency fund, or even an Amazon prime membership.
Why is a sinking fund called a sinking fund?
Why is it called a sinking fund? Don’t be fooled by the seemingly negative word “sinking.” In more traditional circles, “sinking fund” refers to money set aside to pay off long-term debt such as a bond. The term “sinking” likely refers to the decreasing level of debt remaining as it gets paid off.
What is a good sinking fund balance?
If buying into a large strata scheme, you would expect a sinking fund to be hundreds of thousands of dollars. Equally, if you are buying into a block of six, the sinking fund could be reasonable with a balance of only $60,000, because it is a matter of proportion.
How do you calculate sinking fund?
Sinking Fund, A= [(1+(r/m))n*m-1] / (r/m) * P
- P = Periodic contribution to the sinking fund,
- r = Annualized rate of interest,
- n = No. of years.
- m = No. of payments per year.