A trust indenture is a legal document that outlines the terms and conditions of a bond or debt offering. It serves as a contract between the issuer of the bonds and the bondholders, providing a framework for the rights and obligations of each party involved.

The trust indenture typically includes important provisions such as the bond's interest rate, maturity date, payment schedule, and any additional features or covenants. It also defines the roles and responsibilities of the trustee, who acts as a neutral third party representing the bondholders' interests.

One crucial aspect of a trust indenture is the inclusion of protective covenants. These covenants are designed to safeguard the bondholders' interests and provide certain restrictions on the issuer. They may include provisions related to debt repayment, maintenance of collateral, limitations on additional debt issuance, and requirements for financial reporting.

By specifying the terms and conditions of the bond offering, the trust indenture helps provide transparency, clarity, and a level of assurance to both the issuer and the bondholders. It helps protect the bondholders' investment by ensuring that the issuer adheres to the agreed-upon terms and mitigates the risk of default or other unfavorable actions.

Trust indentures are commonly used in corporate and municipal bond offerings, providing a legal framework that helps facilitate the smooth functioning of debt markets and the relationship between issuers and bondholders.