An assumed bond is a type of bond issued by a corporation, typically a subsidiary, which is backed by a guarantee from its parent corporation. This bond represents a binding obligation to pay back the principal amount and interest to the bondholders. Assumed bonds are particularly common in the railroad industry and are also referred to as endorsed bonds or joint bonds.
Assumed bonds are primarily used in corporate finance and securities law. They play a crucial role in transactions involving corporate debt, where the parent company provides a guarantee to enhance the creditworthiness of the subsidiary's bond issues. Legal professionals may encounter assumed bonds in various contexts, including mergers, acquisitions, and restructuring. Users can manage related forms and procedures through templates available on platforms like US Legal Forms.
Here are a couple of examples of abatement:
Example 1: A railroad company issues an assumed bond to finance new infrastructure projects. The bond is guaranteed by its parent corporation, providing investors with confidence in the repayment.
Example 2: A subsidiary of a manufacturing firm issues an assumed bond, with the parent company backing the bond. This arrangement allows the subsidiary to secure better interest rates due to the parent's strong credit rating.
| Term | Definition | Key Differences |
|---|---|---|
| Endorsed Bond | A bond that is backed by a third party. | Often used interchangeably with assumed bond. |
| Joint Bond | A bond issued by two or more parties, sharing the obligation. | Involves multiple issuers, unlike an assumed bond. |
If you are considering investing in an assumed bond or are involved in issuing one, it is essential to understand the terms and obligations involved. You may want to consult with a financial advisor or legal professional to ensure you make informed decisions. Additionally, you can explore US Legal Forms for templates related to bond agreements and corporate financing.
Browse our library of 85,000+ state-specific legal templates.
An assumed bond is guaranteed by a third party, usually a parent corporation, while a regular bond does not have this additional backing.