Corporation debenture is an unsecured loan offered by an individual to a company. The company pays a high rate of interest to the money-lenders and there is no collateral offered for the debenture. If something like a bankruptcy occurs or any kind of financial crisis, the bondholders are given priority over the debenture holders, in terms of payments.
Debentures are always different from stocks and bonds, but basically, all these three are different forms of investment.Corporation debentures are usually offered in issues under an indenture which is a document that sets the term of the exchange. A debenture may be called as a bearer instrument, because whoever is carrying the document, is entitled to get the money, even if the person is not the original creditor.
All the coupons of interest payments on the credit remains attached with the debenture and these are necessary for the final payments on the term maturity.
Comparison between stock and corporation debentures
Anyone investing in stocks, becomes one of the owners of the company and becomes a partner in the company’s loss or gains. The investor automatically becomes related with the company’s financial graph. But debentures are more secured investment as payments with high interest rates are guaranteed.
The company is bound to pay interest on the borrowed money and once the debenture matures, all the borrowed money is returned. So, this is understandable that, it is the interest which one gains from the debentures.
Comparison between bonds and corporation debentures
Bonds are more secured mode of investment than debentures and the investor needs to consider this fact. Debenture and bonds are similar as in both of these investment forms, interest and value is guaranteed, but in case of liquidation, bond holders receive the payment first. Debenture holders have no collateral, which they can claim from the company, in case bankruptcy takes place. To compensate such losses high interest rates are paid to them.
|Debenture Agreements||Definition of Debenture|
|Bank Debenture||Discount Rate|
|Convertible Debenture||Debenture Exchangeable|
|Corporate Debenture||Government Debenture|
|Corporation Debenture||Debenture Holder|
|Debenture Rate||Subordinated Debenture|
Last Updated on : 9th July 2013