Equipment Trust Certificate Law and Legal Definition

An Equipment Trust Certificate is a type of security, generally issued by a railroad or airlines, to pay for new equipment. Title to the equipment, such as a locomotive or aircraft, is held by a trustee and is managed on investor’s behalf until the notes are paid off. The trust then leases the equipment to railroad or to an airline, and the trustee routes payments through the trust to the investors. Upon maturity of the note, the airline or the railroad receives title to the aircraft or locomotive. An equipment trust certificate is usually secured by a first claim on the equipment.