Tag: debentures / bonds

Registered debentures are duly recorded in the register of debenture holders. It is maintained by the company and which can be transferred only through a regular instrument of transfer.

Secured debentures are debentures secured by a charge on the fixed assets of the issuer company. For instance, mortgage debentures secured on land of the company. When the issuer company fails on payment of either the principal or interest amount, the assets of the company can be sold to repay the liability to the investors.

Debentures are an important instrument to raise long term debt capital. They are issued by a company and bear a fixed rate of interest and the company promises to pay the debt at a future date. The debentures that can be converted into equity shares within a specified period of time are known as convertible debentures.

The debentures which are payable to bearer and whose names do not appear in the register of debenture holders are known as “Bearer Debentures”. Coupons for interest are attached to the document and interest is paid to the holders as it falls due. Bearer Debentures are transferable by mere delivery.

Unsecured debentures are debentures that are not supported by a collateral security. No specific assets will be set aside against unsecured debentures. It is basically a loan with out any protection. They are backed only by the general creditworthiness of the issuer.

Debentures that are repaid before other debentures are repaid are known as first debentures. First debenture holders have the right over the company's asset at first.

Debentures are given out to the creditors as a promise to repay the debt held by the company at a fixed rate of interest. Some of the debentures are convertible and non-convertible. The debentures which cannot be converted into equity shares are called as non-convertible debentures.

The second debentures are those which are paid after the first debentures have been paid back. Second debenture holders have the secondary charge over the company's assets.

Debentures bear a fixed rate of interest to be paid at a future date to the the creditors. As fixed charge instruments, debentures put a permanent burden of interest payments on the earnings of a company.

Debentures are issued to the investors from which funds are raised. They are given debenture receipt as a promise of repayment of capital bearing a fixed rate of interest. Hence debenture holders receive interest on their investment.