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We are focusing on debenurs
a fundamental concept
in finance and credit.
A debenture is a type of long
term debt instrument used
by companies to
borrow money from
the public or
institutional investors.
Unlike traditional bank loans,
debenurs are usually unsecured
relying on the issuer's
general credit worthiness.
The issuer promises to
repay the principal at
maturity and pay periodic
interest, called the coupon.
Debentures play a key role
in corporate finance,
allowing companies to raise
funds without
diluting ownership.
Let's explore the main
characteristics of
debenchures and how
they are classified.
Debentures are
usually issued with
a fixed term, commonly five,
seven or 30 years and carry
a stated interest rate,
which can be fixed or floating.
Typically unsecured,
debenre holders
rank below secured creditors,
but above shareholders
in claims on assets.
Some debentures are
convertible into
shares while others
remain debt instruments.
In the UK, debenture can
mean both secured and
unsecured instruments.
In the US, it often
refers specifically
to unsecured bonds.
Issuing debenures
allows companies to
access large pools of capital
from the public market,
avoiding the restrictions and
security requirements
of bank loans.
Investors are drawn
to debenures for
predictable interest income and
their legal claim on repayment.
The risk to investors depends
on the issuer's
credit worthiness,
often rated by agencies like
Moody's or Standard and Poor's.
Lower ratings
indicate higher risk
