Indenture
Principles of Finance glossary · Principles Of Finance
Definition
The legal contract between a bond issuer and holders.
Indenture in plain English
When a company borrows money by selling bonds, it's borrowing from thousands of strangers at once, so everyone needs to agree on the rules up front. The indenture is that master rulebook: the formal legal contract spelling out how much interest gets paid, when, when you get your money back, and what promises the borrower must keep (like not piling on too much extra debt). Think of it as the lease agreement for a loan, the fine print that says exactly what the borrower owes and what happens if they break the terms. Because bondholders are scattered, a trustee is usually named to enforce the indenture on their behalf.
Practice Indenture
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