Debenture
Debenture
In corporate finance, a debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest.
Debentures are usually loans that are repayable on a fixed date, but some debentures are irredeemable securities these are sometimes called perpetual debentures.
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A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture
Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts
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Convertible debentures
Convertible debenture can be converted into equity shares of the issuing company after a predetermined period of time. Convertible debenture are more attractive to investors since the debentures have the ability to convert and also attractive to companies since they typically have lower interest rates than non-convertible corporate debenture.
Non-convertible debentures
Regular debentures which cannot be converted into equity shares of the liable company. Since they are not able to convert, they usually carry higher interest rates than convertible debentures.
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