A type of loan which is usually secured, and which has a fixed or floating charge attached to it. A debenture with a fixed charge has a fixed rate of interest attached to it, whilst a debenture with a floating charge has no fixed rate of interest A secured debenture is one that is specifically tied to the financing of a particular asset. The debenture holder has a legal interest in that asset and the company cannot dispose of it unless the debenture holder agrees. Debenture holders have the right to receive their interest payments before any dividend is payable to shareholders and if the business fails, the debenture holders will be preferential creditors and will be entitled to the repayment of some or all of their money before the shareholders receive anything.
The most common form of long-term loan taken by a company. It is usually a loan repayable at a fixed date, although some debentures are irredeemable securities; these are sometimes called perpetual debentures. Most debentures also pay a fixed rate of interest, and this interest must be paid before a dividend is paid to shareholders.
Most common corporate bonds. Backed by credit of issuer instead of specific assets.
Debentures are loan instruments issued by companies. A company issuing a debenture promises to pay holders a specified amount of interest over a given period of time, and to repay the loan on the maturity date. Debenture holders are considered to be a company's creditors and not shareholders.
(go to top) A bond or loan which is unsecured by any collateral and ranks as secondary to secured borrowing.
Any debt obligation backed solely by the borrower's integrity. E.g. an unsecured bond.
Bonds are long-term debt obligations that are secured by specified assets and a promise to pay. Debentures are similar to bonds but are not collateralized, or secured, by specific assets. Debentures are backed by the overall creditworthiness of the issuer.
A security issued by companies which is usually backed by a specific or variable charge over the issuer's assets.
Interest paying certificates issued to investors who lend money to a company. Some are traded on the stock exchange and others may be placed privately. The loans are backed by company assets and, if the company gets into trouble, investors have first claim to any money raised from the sale of the assets.
A debenture is a loan secured on specific assets owned by a company and is repaid if a company runs into difficulties. They usually have a fixed rate of interest and a fixed maturity date and are often issued by companies with sizeable fixed assets, such as hotel groups and breweries.
This is a document issued by a company which acknowledges that some or all of the company's assets are security for a debt (usually to a bank). It is also a name for certain long-term loans to companies.
A common kind of corporate bond, often issued by a firm during restructuring. Debentures are backed only by the credit quality or essentially the good name of the issuer. Since there is no collateral, these bonds may carry a higher risk, and therefore a higher rate of return, when compared to an asset-backed bond. However, debentures of solid companies may be very highly rated.
Bonds issued by a company bearing a fixed rate of interest usually payable half yearly on specific dates and principal amount repayable on a particular date on redemption of the debentures.
Totally unsecured loans. Loans are guaranteed only by the good reputations of companies. The New York Central Railroad issued many debentures.
Bonds for which no collateral has been pledged.
Certificates of indebtedness issued under an indenture agreement (administered by a trustee) representing long-term borrowings of capital funds, secured only by the general credit of the issuing corporation. Compare BONDS.
Debt issued that is not backed by specific assets. Corporations with few tangible assets -- such as service companies -- or corporations whose assets have already been pledged for another purpose sometimes issue debentures. Some blue-chip companies may be able to successfully borrow from investors without pledging assets. A debenture partially backed by some assets is known as a secured debenture.