A Bond Trust enables many persons to lend money to a company. The lenders usually receive marketable securities issued by the trustee. The trustee holds the lenders’ right to enforce repayment of the loan upon trust for the lenders.
Bond Trusts, or Debenture Trusts, are both examples of Security Trusts. They are designed to protect
persons who have a financial interest in a business, but have little or no control over its day-to-day
Advantages to the Bond Trust structure include:
- The size or nature of the loan may be such that it is difficult to find willing lenders unless their
individual participation is limited to a certain amount
- The trustee will be responsible for ensuring that the borrower complies with the terms of the loan
- The trustee will act even-handedly on behalf of all the bondholders
- The control of the debt is centralised in the hands of the trustee
- The borrower has to deal with the trustee only and not with each of the bondholders
- The borrower’s financial condition is kept confidential so that it is the trustee and not any one
bondholder who decides whether action needs to be taken to protect the interests of the bondholders
The experienced professionals in our Institutional Trust department can provide you with the expert advice and guidance to establish and administer the trust that fits your requirements.