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Series 7
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Textbook
1. Common stock
2. Preferred stock
3. Bond fundamentals
4. Corporate debt
4.1 Review
4.2 Products
4.2.1 Commercial paper
4.2.2 Debentures
4.2.3 Guaranteed bonds
4.2.4 Income bonds
4.2.5 Mortgage bonds
4.2.6 Equipment trust certificates
4.2.7 Collateral trust certificates
4.2.8 Convertible bonds
4.3 Trading
4.4 Bank issues
4.5 Suitability
5. Municipal debt
6. US government debt
7. Investment companies
8. Alternative pooled investments
9. Options
10. Taxes
11. The primary market
12. The secondary market
13. Brokerage accounts
14. Retirement & education plans
15. Rules & ethics
16. Suitability
17. Wrapping up
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4.2.7 Collateral trust certificates
Achievable Series 7
4. Corporate debt
4.2. Products

Collateral trust certificates

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Collateral trust certificates (CTCs) are bonds that are secured by marketable assets owned by the corporation. Types of marketable assets could include a portfolio of investments or a subsidiary.

For example, PepsiCo could issue a bond and pledge Gatorade (a subsidiary of theirs) as the collateral. If PepsiCo doesn’t make the required bond payments, Gatorade becomes the property of the bondholders. In most cases, Gatorade would be liquidated (sold) and the proceeds would be used to pay back bondholders.

Key points

Collateral trust certificates

  • Bonds secured by marketable corporate assets

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