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Simple English definitions for legal terms
bonded debt
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A quick definition of bonded debt:
Bonded Debt: Bonded debt is a type of debt that is secured by a bond. This means that a business or government entity issues bonds to raise money, and the bondholders have a claim on the assets of the entity if it fails to repay the debt. Bonded debt is a long-term debt that is usually used to finance large projects or investments. It is important for investors to understand the risks associated with bonded debt, as the value of the bonds can fluctuate based on market conditions and the financial health of the entity issuing the bonds.A more thorough explanation:
Bonded debt is a type of debt that is secured by a bond. It refers to a business or government debt that is represented by issued bonds. This means that the borrower has issued bonds to investors in exchange for the borrowed money. The borrower is then obligated to pay back the borrowed money plus interest to the bondholders.
For example, a company may issue bonds to raise money for a new project. The investors who buy the bonds become the company's creditors and are entitled to receive interest payments and the return of their principal investment when the bonds mature. The company is obligated to pay back the bondholders according to the terms of the bond agreement.
Another example is when a government issues bonds to finance public projects such as infrastructure development. The bondholders are entitled to receive interest payments and the return of their principal investment when the bonds mature. The government is obligated to pay back the bondholders according to the terms of the bond agreement.
These examples illustrate how bonded debt works and how it is used by businesses and governments to raise capital.