Series 65: Collateral Trust Bonds

Collateral Trust Bonds

Collateral trusts are secured by financial assets, such as stocks and bonds. They are issued by companies that have few hard assets but significant amounts of securities. The indenture usually requires that the market value of the collateral securities always be greater than the face value of the bonds by a specified margin. Should it fall below this minimum, the issuer must provide more collateral to the trust.