What relationship does an indenture create?

An indenture is a formal agreement between a bond issuer and bondholders, outlining the terms of the bond. It serves as a contract that delineates the rights and obligations of both parties regarding the security issued. This legal document specifies key aspects such as interest payments, maturity dates, covenants, and what happens in the event of default.

The relationship created by the indenture is fundamentally between the issuer and the security holders. The issuer agrees to adhere to the outlined terms, while the security holders are provided with certain rights and protections specified in the indenture. This direct relationship ensures that the interests of bondholders are safeguarded and that they are informed of the issuer's obligations.

In contrast, the other options concern relationships that do not fall under the primary function of an indenture. While the issuer may engage counsel and there is a role for the trustee to manage the bondholders' interests, the key purpose of the indenture centers on the direct relationship it facilitates between the issuer and its security holders.