Indenture Trustee Duties: The Pre-Default Puzzle

Authors

Steven L. Schwarcz, Duke Law SchoolFollow

Document Type

Article

Publication Date

2020

Keywords

indenture trustee, bonds, finance, pre-default

Abstract

This Article addresses a topic at the intersection of finance, agency, contract, and trust law: the pre-default duties of an indenture trustee for bondholders. The existing scholarship on indenture trustee duties focuses on the post-default scenario, when the indenture trustee is required to act as a prudent person in like circumstances on behalf of the bondholders. No prior scholarship addresses an indenture trustee’s predefault duties. It is critical to try to define those duties because activist investors in the $42-trillion-plus bond market increasingly are making pre-default demands on indenture trustees, requiring them to know how to respond.

Citation

Steven L. Schwarcz, Indenture Trustee Duties: The Pre-Default Puzzle, 88 University of Cincinnati Law Review 659-684 (2020)