Collateral trust certificates (CTCs) are bonds that are secured by marketable assets the corporation owns. These marketable assets might include a portfolio of investments or ownership interests in a subsidiary.
For example, PepsiCo could issue a bond and pledge Gatorade (a subsidiary of theirs) as collateral. If PepsiCo doesn’t make the required bond payments, the bondholders gain rights to the collateral. In most cases, the collateral would be liquidated (sold), and the proceeds would be used to repay bondholders.
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