Indenture

What is Indenture?

Indenture meaning implies a legal & binding agreement, document, or contract between two or multiple parties. Conventionally, the given set of documents was known to feature perforated edges or indented sides. On historical grounds, indenture is also known to refer to the process of contract binding some individual to work for some other person for a specific period of time.

The individual was referred to as the indentured servant. Such individuals in the past were mostly European immigrants. In the modern era of financing, the term Indenture is most commonly associated with Real Estate deals, bond agreements, and some other concepts of bankruptcies.

Types of Indentures

Here are some of the most common types of indentures as well as clauses that could be linked with indenture contracts:

Real Estate indenture

In the field of real estate, it serves to be a type of Deed. In the given deed, the two involved parties are known to agree on continuing the respective obligations. For instance, one party might agree maintaining the property and the other party might agree on making payments on the same.

Bankruptcy Indenture

As per the law of Bankruptcy, an indenture is defined as a specific proof of claim on the given property. Indentures are generally known to provide specific details on Collateral property. These are also utilized for constituting the claim that the lender would have against the debtor.

Credit Indentures

It is a type of Underlying contract agreement that is used for detailing all the respective provisions as well as clauses that are associated with a specific credit Offering. In the case of bond offerings that are uncollateralized and non-secured, the given type of indentures is referred to as “Debentures.”

In most cases, a credit indenture is known to be utilized for the sake of bondholders and bond issuers. It is known to specify the most vital features of a bond –like the maturity date, the process of calculating interest, interest payments & their timings, convertible features, callability, and so more. A bond indenture is also known to specify all possible terms & conditions that are applicable to the bond issue.

Some of the other critical information that might be included in credit indentures tends to be financial covenants. These are responsible for governing the issuer as well as the formula for measuring whether or not the issuer is within the covenant. In case there is some dispute between the bondholder and the issuer, the indenture serves to be the reference document that is used for ensuring conflict resolution.