In financial terms, a debenture is a freely transferable commodity, one that government institutions as well as big companies use to generate or amass funds. It is similar to a bond. The distinction, however, lies in the fact that the terms and conditions of the contract are different.
A debenture is not considered as safe or secure, in the sense that the issuer makes no promise on any specific property or asset. However, the conditions in the contract itself protect a debenture. If there is a bankruptcy, the holders become creditors.Debenture holders can transfer them, whenever they wish to do so. Another benefit is that their property or other assets are not tied up as collateral, leaving them open for other transactions.
Over the years in the UK, leading companies have used debentures to raise money and fund sports and leisure events.
A famous example would be The All England Lawn Tennis and Croquet Club, who in, as early as 1920 issued debentures, which generated very little in the way of interest.
However, the holders had the privilege and luxury of being able to watch the world famous tennis action, right there in the thick of things at center court. Another example are the debenture holders of The Royal Albert Hall, they become members of that prestigious association.
They sit in box seating of their own, from where they get to watch all the performances that take place there. Other associations that have followed suite are world famous stadiums such as Wembley, Millenium, and Twickenham. Top clubs like Arsenal and the Nottinghamshire County Cricket Club have been issuing debentures hoping to increase their ability to raise capitol.
These organizations issue debentures every five years. Therefore, current holders must reinvest, in order to maintain their privileges.
|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