The Debenture has some similarities with Bonds but the terms and conditions of securitization of Debentures are different from that of a bond. A debenture is regarded as an unsecured investment because there are no pledges (guarantee) or liens available on particular assets. However, a debenture is backed by all the assets which have not been pledged otherwise. Debentures- free negotiable Debt instruments
Debentures are referred to as free negotiable Debt instruments. The Debenture holder functions as a lender to the issuer of the Debenture. In return a specific rate of interest is paid to the Debenture holder by the Debenture issuer similar to the case of a loan. In some cases, Bonds are also termed as Debentures and vice- versa and in the case of a bankruptcy, Debenture holders are considered as general creditors. Classification of Debentures
Debentures are categorized into the following types
Convertible Debentures is a debenture which can be converted into some other type of securities. Corporate Debentures are...