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LLM Law Outlines Corporate Bonds and Credit Agreement Outlines

The Trustee Outline

Updated The Trustee Notes

Corporate Bonds and Credit Agreement Outlines

Corporate Bonds and Credit Agreement

Approximately 204 pages

Corporate Bonds and Credit Agreement with Kahan Spring 2019...

The following is a more accessible plain text extract of the PDF sample above, taken from our Corporate Bonds and Credit Agreement Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:

VI. The Trustee

Model Simplified Indenture, Section 7.01-7.11
Elliott Assocs. v. J. Henry Schroeder, 838 F.2d 66 (1988) (P. #1)

  • Trustees can do anything: accelerate, notice of default, bring suit

    • Without 50% of bondholder, only the trustee can do these things

    • 25-50% bondholder trustee may but not obligated to bring suit

  • Bondholders cannot rely on trustee - trustees are lazy as they are paid very little fixed fee by the company and are worried of potential liability (not compensated on hourly basis nor high rate) doing nothing is ideal for trustee, but trusteeโ€™s outside counsel would want more work so they get paid more (and trustee gets reimburse)

  • Trustees are selected and paid by companies โ€“ bondholders sometimes can replace trustee


  • 7.01 Duties of Trustee

    • (a) If an Event of Default has occurred, Trustee shall exercise and use same degree of care and skill as a prudent person

      • Once E of D, prudent person standard

    • (b) Except during Event of Default

      • May rely on info provided by the company

      • Prior to Event of Default, Trustees only have duties that are set forth in this indenture

        • 7.05 If Trustee knows of default, must notify holders w/in 90 days unless no notice is in holders best interest

          • (Prof: cannot think of any situations)

          • Trustee doesnโ€™t investigate it, but knows company has to do certain things in certain time or Trustee would be notified, e.g. SEC filings not filed

        • Event of default is bad for trustee, as obligation arises

    • See Elliott

  • 7.07: Reimbursement of expenses

  • 7.08 remove trustee by majority

  • 6.10 when trustee collects money, will pay out the money to itself first,...

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