Obligor

DEFINITION of 'Obligor'

A person or entity who is legally, or contractually, obliged to provide some benefit or payment to another. In the financial context, the term obligor refers to a bond issuer, who is contractually bound to make all principal repayments and interest payments on outstanding debt. The recipient of the benefit or payment is known as the obligee.


An obligor is also referred to as a "debtor."

BREAKING DOWN 'Obligor'

As bond issues are contractual obligations, issuers have very little leeway in terms of deferring principal repayments or interest payments. Any delay in payment or non-payment of interest could be interpreted as a default for the bond issuer, an event that could have massive repercussions and long-term ramifications for the continuing viability of the business. As a result, most bond issuers take their debt obligations very seriously. With that said, defaults by over-leveraged issuers do occur from time to time.

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