When an obligor on a bond issue defaults and can’t make payments to its bondholders, the bondholders naturally turn to their bargained-for collateral, hoping their prospects for recovery will fare better from the proceeds of that collateral than from the obligor’s business fortunes. Not surprisingly, after an event of default has occurred, protection of and realization on collateral conveyed to the indenture trustee is among the trustee’s most important functions, which is consistent with prudent person standards applicable under the Trust Indenture Act of 1939 (as amended, the TIA) and terms of typical indentures that reflect applicable common law principles.
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