a bond that is back by collateral
The issuer of a bond or other debt security may guarantee, or secure, the bond by pledging, or assigning, collateral to investors. If the issuer defaults, the investors may take possession of the collateral. A mortgage-backed bond is an example of a secured security, since the underlying mortgages can be foreclosed and the properties sold to recover some or all of the amount of the bond. Holders of secured bonds are at the top of the pecking order if an issuer misses an interest payment or defaults on repayment of principal. However, there were instances, in India, where the Trustees of a bond failed to carry out their obligations, leaving the investors in a lurch, when defaults in interest payment or repayment of principal occurred.
A corporate bond which has asset pledged as collateral (vs. debenture). See: Open-End and Closed-End Indenture.
A bond backed by the pledge of collateral, a mortgage, or other lien, as opposed to an unsecured bond, called a debenture.
A bond in which the issuer pledges something of value to guarantee the safety of the bondholder's investment.
Secured Bond refers to mortgage bonds backed by real estate that can be liquidated. Also to bonds backed by collateral, the title to which can be transferred to the bondholders in the event of default. Unsecured bond carry greater risk than secured bonds, and usually pay higher yields. Secured Loan A loan that is backed by collateral.
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