collateral trust bond

Collateral Trust Bond

A bond that is secured by a financial asset - such as stock or other bonds - that is deposited and held by a trustee for the holders of the bond.

Notes:

If the issuing company were to default on the debt obligation, the debt holders would receive the securities held in trust, like collateral for a loan.

For example, say Company A issues a collateral trust bond, and as collateral for the bond it includes the right to Company A shares held by a trust company. If Company A were to default on the bond payments, the bondholders would be entitled to the shares held in trust.

See also: Bond, Collateral, Debt, Default, Issuer, Secured Debt, Trust, Trustee

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collateral trust bond

A long-term debt obligation with a claim against securities rather than against physical assets. This type of bond is issued primarily by holding companies that own mainly securities of subsidiaries.