Closed-End Indenture

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DEFINITION of '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.

INVESTOPEDIA EXPLAINS 'Closed-End Indenture'

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.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Indenture

    A legal and binding contract between a bond issuer and the bondholders.
  3. Senior Security

    A security that ranks above another security in the event of ...
  4. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  5. Covenant

    A promise in an indenture, or any other formal debt agreement, ...
  6. Open-End Indenture

    A clause in a revenue-bond agreement that permits the issuance ...
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