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Debentures

In law, debenture refers to a document which creates or acknowledges a debt. In corporate finance, it refers to an instrument used by companies to loan money. Debentures are generally transferable.

964 Questions

Difference between debenture and preference share?

Preference share holders have the highest preference of getting their investment bank when the company goes bankrupt. The company has fulfill its obligation by selling its assets. Here the preference first comes to preference share holders and then debenture holders and then equity

holders.

How do you make the debenture more popular?

the companies that have issued debentures in recent years.give suggestions to make debentures more popular?

Is British premier oil a real of fake?

I don't think that this is not real, It is a real fake. Don't believe it anymore.

Huh?

Can company issue debenture with pari passu clause?

YES, a company can issue its debentures with a pari passu clause when they are issued in series. This implies that the debentures shall be paid proportionately. This assumes an added advantage when the company is short of cash & does not have the amount to make payment for debentures.In such case, all the debentures held by a creditor of the company ranked equal as regard charge and repayment with the others of that series.

However, a company cannot give this right tto its new debentureholder of its old debentures unless it is expressly authorised to do so.

What are the types of debentures?

What is a Debenture?

A Debenture is a debt security issued by a company (called the Issuer), which offers to pay interest in lieu of the money borrowed for a certain period. In essence it represents a loan taken by the issuer who pays an agreed rate of interest during the lifetime of the instrument and repays the principal normally, unless otherwise agreed, on maturity.

These are long-term debt instruments issued by private sector companies. These are issued in denominations as low as Rs 1000 and have maturities ranging between one and ten years. Long maturity debentures are rarely issued, as investors are not comfortable with such maturities

Debentures enable investors to reap the dual benefits of adequate security and good returns. Unlike other fixed income instruments such as Fixed Deposits, Bank Deposits they can be transferred from one party to another by using transfer from. Debentures are normally issued in physical form. However, corporates/PSUs have started issuing debentures in Demat form. Generally, debentures are less liquid as compared to PSU bonds and their liquidity is inversely proportional to the residual maturity. Debentures can be secured or unsecured.

What are the different types of debentures?

Debentures are divided into different categories on the basis of: (1)convertibility of the instrument (2) Security

Debentures can be classified on the basis of convertibility into:

· Non Convertible Debentures (NCD): These instruments retain the debt character and can not be converted in to equity shares

· Partly Convertible Debentures (PCD): A part of these instruments are converted into Equity shares in the future at notice of the issuer. The issuer decides the ratio for conversion. This is normally decided at the time of subscription.

· Fully convertible Debentures (FCD): These are fully convertible into Equity shares at the issuer's notice. The ratio of conversion is decided by the issuer. Upon conversion the investors enjoy the same status as ordinary shareholders of the company.

· Optionally Convertible Debentures (OCD): The investor has the option to either convert these debentures into shares at price decided by the issuer/agreed upon at the time of issue.

On basis of Security, debentures are classified into:

· Secured Debentures: These instruments are secured by a charge on the fixed assets of the issuer company. So if the issuer fails on payment of either the principal or interest amount, his assets can be sold to repay the liability to the investors

· Unsecured Debentures: These instrument are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount, the investor has to be along with other unsecured creditors of the company.

What is a shift preference?

What working hours you prefer, day, swing or night shift.

What does a pooled issue mean?

A pooled issue, in relation to securitisation, is where a number of different entities will raise capital through a single vehicle which then on-lends to the respective entities. The entities will "pool" their assets together as security for the bond allowing smaller funding requirements to be met through the capital markets where a minimum issue size would be in excess of £40-50m.

Benefits:

Access to Capital Markets: Individual entities can raise smaller amounts allowing access to the Capital Markets

Access to long term funding: reducing refinance risk (whereas traditional bank lenders currently will only lend short term 5-10yrs max)

Shared costs: legal, trustee and other associated costs split.

Credit Rating: Combined credit can improve the credit rating thus tightening pricing.

What are shares and debentures?

A debenture is an unsecured loan you offer to a company. The company does not give any collateral for the debenture, but pays a higher rate of interest to its creditors. In case of bankruptcy or financial difficulties, the debenture holders are paid later than bondholders. Debentures are different from stocks and bonds, although all three are types of investment. Below are descriptions of the different types of investment options for small investors and entrepreneurs.

Debentures and Shares
When you buy shares, you become one of the owners of the company. Your fortunes rise and fall with that of the company. If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the investments are low paying. The higher the risk you take, the higher the rewards you get.

Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates. The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you. The interest is the profit you make from debentures. While shares are for those who like to take risks for the sake of high returns, debentures are for people who want a safe and secure income.

Why debenture redemption reserve is transfer to general reserve?

When debentures are redeemed payment is made from a reserve which is created at the time of purchase of such debentures,therefore at the time of payment first it is transferred to general reserve then as it is expenditure to company.

What is a debenture certificate?

it is a document that serve as evidence of a debenture for a debenture share holder

How do you buy the debenture?

i think debenture could be bought in an environment where debt securities are traded from private companies usually more than a year and with a fixed interest rate.

What are the uses of share premium?

Share premium is used for many purposes and 1 of them is redemption of preference shares and debentures

What are the merit and demerit of debenture?

Hi

merit of dbenture - trading on equity is possible as debenture holders get a lower rate of return than the earnings of the company.

demerit of debenture-cost of raising capital through debentures is high of high stamps duty.

What is optionally fully convertible debenture?

Optionally fully convertible debenture is an instrument that does not yield interest in the initial period of say, 6 months. After this period option is given to the holder of FCDs to apply for equity at a "premium" for which no additional amourit needs to be paid. The option has to be indicated in the application form itself. However, interest on FCDs is payable at a determined rate from the date of first conversion to the second / final conversion and in lieu of it, equity shares are issued.

What are zero-coupon debentures or bonds?

A zero coupon bond pays no interest. Thus the market price for such a bond is always LESS than the maturity (face) value. The amount by which the bond is priced below its maturity value is known as the DISCOUNT.

For example, a $100 zero coupon bond maturing in one year priced to yield 10% (in simple terms) would be sold to the investor for $90.91 on the date of issue. The investor would receive no payments from the borrower until maturity, at which time the investor receives the $100 face value. Some brokerages will take a regular bond with coupons and "strip" it. They'll remove the coupons and sell the corpus of the bond separately from the coupons. A zero-coupon bond that was issued as such will normally have a really long maturity date--five to ten years isn't uncommon. You buy them as long-term investments...if you've got a child who will begin college when she's 19, you might want to buy ten-year zero-coupons that mature as the child enters each year of college.

What is a portfolio manager?

A portfolio manager is someone who manages a group of investments for someone else.

Advantages and disadvantages of debenture?

i wish i knew, i wouldn't be asking otherwise. someone put in a real answer please. thank you

This is a form of long term loan that can be taken out by a public limited company for a large sum and it will be paid back over several years. It is usually borrowed from specialist financial institutions. Limited companies can issue debentures to the public. The firm commits itself to repay with interest for up to 25 years.

+ Long term loans Up to 25 years.

- Interest charge and it would be paid on the loan whether or not profits are made this is an expense.

they are mentioned along shares but are not shareholders

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Avilene Almeida writes:

Debenture holders or suppliers of loan capital have no controlling interest in the Company.

The cost of debt is lower than cost of equity or preference shares as interest is tax deductible.

Debenture help in mobilization of savings from the public particularly from tose investors who are risk aversive.

Are debenture holders owners of the company?

No, debenture holders are not owners of the company. They are one of the lenders in the company, and are entitled to interest.