Definition and information on Endorsed Bond

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Endorsed Bond
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)

This term has two meanings:

1. A bond endorsed by a person or corporation other than the maker whose direct obligation it is. Endorsed bonds usually arise out of a consolidation in which the parent corporation endorses the bonds of its subsidiary. In order to strengthen their market value, or as collateral for loans, the parent company may endorse them. A guaranty is implied in an endorsed bond, the endorser becoming liable in case of nonpayment, just as in the case of an endorser of a note. The terms of the guaranty are written upon the bonds themselves, or upon a separate document. The underlying security is not changed by the endorsement.

2. A bond with writing or signatures extraneous to the text written thereon. By a rule of the New York Stock Exchange, a coupon bond bearing an endorsement of a definite name of a person, firm, occupation, association, etc., in conjunction with words of condition, qualification, direction, or restriction not properly pertaining thereto as a security, shall not be a delivery unless sold specifically as an endorsed bond. This rule also applies to bonds with coupons bearing such endorsements.

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