AskDefine | Define debenture

Dictionary Definition

debenture

Noun

1 a bond that is backed by the credit of the issuer but not by any specific collateral [syn: unsecured bond, debenture bond] [ant: secured bond]
2 a certificate or voucher acknowledging a debt

User Contributed Dictionary

English

Noun

  1. A certificate that acknowledges a debt
  2. An unsecured certificate of debt backed only by the credit of the borrower.
  3. : Written acknowledgement of a debt secured only by the general credit or promise to pay of the issuer. Debentures are the common type of bond issued by large, well established corporations with adequate credit ratings. The written agreement under which the debentures are sold, the indenture, is specific as to maturity date, interest rate, call features, and convertibility. Holders of debentures representing corporate indebtedness are creditors of the corporation, and entitled to payment before shareholders upon dissolution of the corporation.

Extensive Definition

A debenture is defined as a certificate of agreement of loans which is given under the company's stamp and carries an undertaking that the debenture holder will get a fixed return (fixed on the basis of interest rates) and the principal amount whenever the debenture matures.
In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. It is defined as "a debt secured only by the debtor’s earning power, not by a lien on any specific asset." It is similar to a bond except the securitization conditions are different. A debenture is usually unsecured in the sense that there are no liens or pledges on specific assets. It is, however, secured by all properties not otherwise pledged. In the case of bankruptcy debenture holders are considered general creditors.
The advantage of debentures to the issuer is they leave specific assets burden free, and thereby leave them open for subsequent financing. Debentures are generally freely transferrable by the debenture holder. Debenture holders have no voting rights and the interest given to them is a charge against profit.

Debenture holders

In the United Kingdom debentures have frequently been used as a mechanism for raising funds to build or finance sports or leisure venues. Often these debentures pay little or no interest, but entitle the holder to privileges, usually tickets for the venue. For example, the All England Lawn Tennis and Croquet Club first issued debentures in 1920 in order to purchase the current premises in Wimbledon, London, and debenture issues take place every five years. The 2001-2005 debenture issue was priced at £2,000 each, with an additional premium of £18,000, and Value Added Tax of £3,150; holders of these debentures are entitled to a free seat in the Centre Court Stand for each day of the championships for five years, and have access to exclusive lounge and catering facilities. At the Royal Albert Hall debenture holders are known as members; they own rights to individual boxes, and are entitled to view almost all performances. In 2003 Box 70 was offered on the open market for £250,000 . Other stadia financed through the issue of debentures include Millennium Stadium, Wembley Stadium, Arsenal, Twickenham Stadium, Lord's Cricket Ground, and Trent Bridge in Nottingham.

Nomenclature

In practice the distinction between bond and debenture is not always maintained. Bonds are sometimes called debentures and vice-versa.
In some countries (notably the United Kingdom), the term debenture is also frequently used by the legal profession as shorthand for a security document which creates fixed and floating charges over all of the property of the chargor. This usage derives from the frequent inclusion of provisions for security interests in conventional debt instruments.

References

debenture in Portuguese: Debênture
debenture in Russian: Дебентура
debenture in Finnish: debentuuri
debenture in Swedish: Förlagsbevis
debenture in Urdu: ڈبنچر

Synonyms, Antonyms and Related Words

CD, Fannie Mae, Federal Agency bond, Ginnie Mae, IOU, MO, Series E bond, Series H bond, acceptance, acceptance bill, adjustment bond, annuity bond, appreciation bond, arrangement, assented bond, assumed bond, baby bond, bank acceptance, bank check, bearer bond, bearer certificate, bill, bill of draft, bill of exchange, blank check, bond, bond anticipation note, callable bond, certificate, certificate of deposit, certified check, check, checkbook, cheque, collateral trust bond, commercial paper, consolidated annuities, consolidated stock, consols, contract by deed, contract of record, contract quasi, convertible bond, convertible debenture, corporate bond, corporation stock, coupon bond, coupon rate, covenant of indemnity, current income bond, current yield, debenture bond, deed, deed of trust, deed poll, deep-discount bond, defense bond, deferred bond, definitive bond, demand bill, demand draft, discount bond, draft, due bill, equipment bond, equipment note, equipment trust, equipment trust bond, equipment trust certificate, exchequer bill, extended bond, first mortgage bond, firsts, formal contract, general mortgage bond, general obligation bond, government bond, group policy, guaranteed bond, high-grade bond, implied contract, income bond, indent, indenture, insurance policy, interchangeable bond, interim bond, joint bond, letter of credit, money order, mortgage bond, mortgage deed, municipal bond, negotiable bond, negotiable instrument, nominal rate, nonnegotiable bond, note, note of hand, optional bond, paper, par bond, parol contract, participating bond, perpetual bond, policy, postal order, premium bond, promissory note, purchase money bond, recognizance, refunding bond, registered bond, registered certificate, revenue bond, savings bond, second mortgage bond, seconds, secured bond, sight bill, sight draft, small bond, special contract, specialty, specialty contract, state bond, tax anticipation note, tax-free bond, time bill, time draft, title deed, trade acceptance, treasury bill, treasury bond, trust indenture, trustee mortgage bond, unsecured bond, voting bond, voucher, war bond, warrant, yield to maturity
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