Equipment Trust Certificates Financial Glossary

What is it? A common type of secured corporate bond. For these bonds, a collateral interest in equipment or machinery provides extra protection for bond holders. In most cases, the equipment that is pledged to secure the bonds is equipment or machinery that is purchased from the proceeds of the bond issue. Typically, a trustee will purchase the equipment, issue the bonds, and lease the equipment to the end user. The end users lease payments to the trustee are passed to the bond holders in the form of interest and principal. When the bonds are retired, the end user acquires title to the equipment. Airlines, railroads, and shipping companies are the most common issuers.

Finance Term Definition Added By: Joseph

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