Secured bondholders can foreclose on the collateral in the event of nonpayment of interest or principal.

Question

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Secured bondholders have the right to seize the collateral pledged by the issuer in case of default. This collateral may include assets such as land, buildings, equipment, or inventory. The foreclosure process allows secured bondholders to sell the collateral to recover their investment. This is why secured bonds are considered less risky than unsecured bonds since they offer some protection to investors in case of default.

Secured Bondholders Can Foreclose on the Collateral in the Event