Closed-end Indenture (redirected from closed end indenture)

Closed-end Indenture

A term in a bond contract that guarantees that the collateral used to back the bond issue cannot be used again to back another bond issue. This is the opposite of an open-end indenture in which more than one bond can be backed by a single collateral.

Notes:

If the bond issuer defaults, a closed-end indenture ensures the bondholders will have the only claims on collateral, making their bonds the most senior security. The fewer claims that exist on the collateral, the more safety a bondholder has.

See also: Bond, Collateral, Covenant, Indenture, Negative Covenant, Negative Pledge Clause, Open-end Indenture, Senior Security