2.3 Structural Factors Addressing Risk and Investor Interests

Publicly issued, long term debt comes in a variety of forms. The basic documentation includes an indenture (between the public agency issuer and a trustee) or another indenture like document such as a trust agreement, a bond resolution (adopted by public agency issuer), and a paying agent agreement (between public agency issuer and paying agent). Bonds generally mature more than 1 year from the date of issuance. The issuer typically makes debt service payments to a trustee or paying agent who in turn makes payments to bondholders.

Bonds are structured to meet the needs of not only the issuer but also the investors. “Market conventions” are provisions embedded in the structure of the bonds to make a bond issue more acceptable to the market. Knowing the common market conventions helps issuers determine the type of provisions that they may need to include in the structure to reach specific investors or the market in general.