Unlike bonds or loans taken from banks, debentures appear to be something which are less concrete as the entire transaction is completed in good faith.The holder has to, and usually relies on the issuer being worthy enough of paying back when the fixed date arrives. It is an important method of generating revenue or financial income.
The debentures could be considered to be specially creditable and backed up by assets if the organization issuing them pledges property worth exactly the same as the amount quoted in the proposal. All the activities are performed keeping in mind the fact that holders need to be provided with a certain amount of assurance, which is an extra benefit so to say.
There are other factors however, which may tilt the scale in favor of the issuer. If it is found that the issuer has a clean chit regarding its treatment of the clients, past and present, as well as a uninterrupted flow of income, then the said party stands to issue debentures.
It need not put its assets on the firing line itself. The condition of exchange of property then becomes as good as null and void. The holders of debentures of that company in the given circumstances, are then entitled to the property that has been kept out of the contract; a default and they would be able to lay claim to the property, not pledged by the issuer.
Nowadays debentures are a significant amount of debts or outstanding dues in the corporate sector. The cue seems to have been taken up by governments all around, or bodies affiliated to it. They have also started issuing debentures. The example of treasury securities would be worth mentioning, in this regard. Debentures could be purchased by investors from brokers entrusted with selling them.
The debentures, being sold could be priced at say, a denomination, ranging from $1000 to $10000. The price level is calculated, based on the aspect of maturity.
The agreements are done with the benefit of securing the interests of the bondholders. The entire arrangement is made with an eye to maintain a status quo as much as possible.
|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