Trustee
Corporate Credit Analysis glossary · Credit Agreements & Covenants
Definition
A bondholder-appointed intermediary that holds the indenture, monitors compliance, communicates with bondholders, and acts on instructed defaults; usually a corporate-trust subsidiary of a major bank.
Trustee in plain English
When thousands of strangers all lend money to one company by buying its bonds, they can't each individually watch the company or argue with it — so they appoint one referee to act for all of them. That's the trustee: it holds the official rulebook of the bond deal (the indenture), checks that the company keeps its promises, passes news to the bondholders, and, if the company breaks the rules, takes action on the group's behalf. It's usually a specialized arm of a big bank hired to play this neutral, watchdog role.
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