Trust Indenture
After the governing body of the issuer approves the proposal, it signs a trust indenture, which is the issuing document for a revenue bond.
A trust indenture is a contract between an issuer and a trustee who acts as a fiduciary for the bondholders.
The trustee has the power to enforce the terms of the indenture. Where a GO bond carries the full faith and credit of the taxing authority, a revenue bond has no such guarantee, and so a trustee is employed to look out for the interests of the investor.
While a bond resolution remains as part of the bond documentation, it only attests to the issuer’s approval and authorization of the execution of the indenture. It is the trust indenture that defines the legal terms and financing specifications of the bond.
Note: The bond resolution usually does not require voter approval in a negotiated bid.
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Authorizing the Bonds |
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Competitive Bid Offering (Typically GO bonds) |
Negotiated Sale Offering (Typically revenue bonds) |