Collateral trust certificates

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.