the payment of the principal, interest, or both of which has been guaranteed
by a party other than the original debtor.
Railroad and industrial corporations sometimes guarantee the bonds
and notes of leased or controlled companies, subsidiaries, or companies
in which they are financially interested in order to strengthen their
credit or to elevate their investment position.
the market value of bonds guaranteed by another party is undoubtedly enhanced
by such guaranty, investors should not purchase this class of bonds because
of the guaranty alone. Such bonds should be intrinsically sound in themselves without
the guaranty, since it may be difficult to enforce the guaranty against
the guarantors in case of default of the principal debtors in an action
at law. Guaranteed bonds
should be supported by sufficient security to meet the principal and interest,
and the guaranty should be in such form as to compel the guarantor to
meet any deficiency on the part of the principal debtor.
bonds are guaranteed after their issue, the guaranty appears in a separate
instrument, and the fact of guaranty is not recited on the face of the
bond at all. When bonds are
guaranteed by endorsement, the fact of guaranty is stated on the face
of each bond which contains the signature of the guarantor company.
bonds are similar to ASSUMED BONDS and endorsed bonds.
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