Bond trustee is a financial institution having trust powers and responsible for transfer, registration or payments of bonds. Examples are commercial banks or trust company given powers by a bond issuer to enforce the terms of bonds indenture.
An indenture is a contract between a bond issuer and a bond holder. A bond trustee ensures interest payments are made as planned and on time as well as protects the interests of the bondholders in cases of default issues. Also guarantees that the re-payment terms and legal obligations of the security are being properly met. Debenture trustee is responsible to monitor compliance of the issuer with covenants of a debt security. If this role is not adequately and responsibly played, it can cause a loss to the bondholders and lead to loss of investor confidence in general.